ANNUAL REPORT Financial Review 2020 Contents Management’s Discussion and Analysis

1 Management’s Discussion and Analysis The Group has prepared its consolidated financial state- Revenue 4 Eleven-Year Summary ments in accordance with International Financial Reporting ¥ billion Standards (IFRS) beginning from fiscal 2020. Figures for 2020 2,994.5 6 Operational Risks fiscal 2019 are reclassified under IFRS and are stated 2019 3,507.2 together for comparison. 10 Remuneration for Directors and Executive Officers Unless stated otherwise, all figures are taken from the 2018 3,650.1

12 Stock Holdings consolidated financial statements and notes. U.S. dollar 2017 3,643.4 figures have been translated solely for the convenience of 16 Consolidated Statement of Financial Position 2016 3,337.0 readers outside at the rate of ¥103.50 to $1, the IFRS J-GAAP 18 Consolidated Statement of Profit or Loss prevailing exchange rate on December 31, 2020.

19 Consolidated Statement of Comprehensive Income Results of Operations 20 Consolidated Statement of Changes in Equity Business environment Adjusted Operating Profit In terms of the Group’s operating environment, after a ¥ billion

21 Consolidated Statement of Cash Flows global decline in tire demand caused by the novel corona- 2020 222.9 virus disease (COVID-19) during the first and second quarter 22 Notes to Consolidated Financial Statements 2019 343.1 of fiscal 2020, the Group saw a recovery in demand during 87 Independent Auditor’s Report the third quarter as restrictions on the movement of people 2018 402.7

and goods were eased and economic activities resumed. In 2017 419.0 the fourth quarter, a second wave of COVID-19 caused a 2016 449.5 decline in demand for passenger vehicle tires, whereas

demand for truck and bus tires remained strong as the IFRS J-GAAP trend of recovery continued. For the full year, the Group experienced a large decline in tire demand compared with the previous fiscal year. Adjusted Operating Profit Margin

Revenue, adjusted operating profit, and operating profit 2020 2019 2018 2017 2016 Revenue decreased by ¥512.7 billion ($4,954 million), or 15%, IFRS J-GAAP from the previous fiscal year, to ¥2,994.5 billion ($28,933 % of net sales million), primarily due to a drop in global demand for tires 7.4 9.8 11.0 11.5 13.5 as a result of COVID-19. For the same reason, adjusted operating profit decreased by ¥120.2 billion ($1,161 million), or 35%, from the Currency Exchange Rates previous fiscal year, to ¥222.9 billion ($2,154 million). In Annual average rates addition, operating profit decreased by ¥285.2 billion 180 ($2,756 million), or 82%, from the previous fiscal year, to ¥64.1 billion ($619 million), due to the recording of impair- ment losses of ¥95.4 billion, of which ¥5.8 billion was 127 130 130 122 recorded as business and plant restructuring expenses. As a ¥120/€1 122 result, the adjusted operating profit margin dropped 2.3 ¥109/$1 112 110 percentage points, to 7.4%. 109 107

The average yen/dollar exchange rate in fiscal 2020 was 80 ¥107, compared with ¥109 in the previous fiscal year, while 2016 2017 2018 2019 2020 the average yen/euro exchange rate in fiscal 2020 was ¥122, compared with ¥122 in the previous fiscal year.

The Corporation is referred to as the “Company,” and the Company and its subsidiaries are referred to as the “Group” in this publication.

Forward-Looking Statements The descriptions of projections and plans that appear in this annual report are “forward-looking statements.” They involve known and unknown risks and uncertainties in regard to such factors as product liability, currency exchange rates, raw material costs, labor-management relations, and political stability. These and other variables could cause the Bridgestone Group’s actual performance and results to differ from management’s projections and plans.

ANNUAL REPORT 2020 Financial Review 1 Management’s Discussion and Analysis

Performance by business segment Revenue by Business Segment Financial Condition Total Assets The following business results for each segment reflect a Net of inter-segment transactions ¥ billion

major decline in tire demand that took place over the 2020 2019 Assets 2020 4,189.3 course of fiscal 2020 in comparison with the previous fiscal ¥ billion Total current assets were ¥2,054.5 billion ($19,851 million), 2019 4,277.0 year, despite a definite recovery in demand in the third and Japan 762.6 918.1 increasing by ¥136.1 billion ($1,315 million), or 7%, from the fourth quarter of fiscal 2020 from a global decline in tire Americas 1,407.9 1,661.7 end of the previous fiscal year, as trade and other receiv- 2018 3,840.3 Europe, Russia, Middle East, India and demand caused by COVID-19 in the first and second quarter. ables decreased by ¥87.6 billion ($846 million), and 2017 3,959.0 The segment results include inter-segment transactions Africa 564.3 640.1 inventories decreased by ¥138.9 billion ($1,342 million), China, Asia-Pacific 2016 3,716.0 that are eliminated when calculating consolidated results. 394.6 462.8 whereas cash and cash equivalents increased by ¥377.6 IFRS J-GAAP billion ($3,649 million). • Japan Composition of Revenue by Business Segment Non-current assets were ¥2,134.8 billion ($20,626 In Japan, unit sales of tires for passenger and light Net of inter-segment transactions million), decreasing by ¥223.8 billion ($2,162 million), or 9%,

trucks and unit sales of tires for trucks and buses decreased 2020 2019 from the end of the previous fiscal year, as property, plant Total Equity ¥ billion substantially compared with fiscal 2019. As a result, revenue % of net sales and equipment decreased by ¥163.0 billion ($1,575 million), decreased by 17%, to ¥762.6 billion ($7,368 million), and Japan 24.4% 24.9% mainly due to the recording of impairment losses. 2020 2,195.3 adjusted operating profit decreased by 41%, to ¥64.6 billion Americas 45.0% 45.1% 2019 2,402.5 ($624 million), from the previous fiscal year. Europe, Russia, Middle East, India and Liabilities 2,436.2 Africa 18.0% 17.4% Total current liabilities were ¥1,041.7 billion ($10,065 million), 2018 China, Asia-Pacific • Americas 12.6% 12.6% increasing by ¥146.4 billion ($1,415 million), or 16%, from the 2017 2,402.7 In the Americas, unit sales of tires for passenger cars and end of the previous fiscal year, as trade and other payables 2016 2,345.9 light trucks in North America and overall unit sales of tires decreased by ¥32.9 billion ($318 million), whereas bonds Profit attributable to owners of parent IFRS J-GAAP for trucks and buses decreased significantly compared with and borrowings increased by ¥158.5 billion ($1,532 million). In fiscal 2020, profit attributable to owners of parent fiscal 2019. As a result, revenue decreased by 15%, to Total non-current liabilities were ¥952.3 billion ($9,201 decreased from a profit of ¥240.1 billion in fiscal 2019 to a ¥1,407.9 billion ($13,603 million), and adjusted operating million), decreasing by ¥26.9 billion ($260 million), or 3%, loss of ¥23.3 billion ($225 million), due to the recording of a profit decreased by 24%, to ¥139.9 billion ($1,352 million), from the end of the previous fiscal year, as bonds and Ratio of Equity Attributable to Owners of Parent decrease in operating profit of ¥285.2 billion ($2,756 million) from the previous fiscal year. borrowings increased by ¥6.5 billion ($63 million), whereas % and an impairment loss related to shares using equity retirement benefit liabilities decreased by ¥19.9 billion ($193 70 method of ¥18.2 billion ($176 million). • Europe, Russia, Middle East, India and Africa million) and deferred tax liabilities decreased by ¥15.8 61.5 61.9 59.2 In Europe, unit sales of tires for passenger cars and light billion ($152 million). 60 trucks and unit sales of tires for trucks and buses decreased Furthermore, total interest-bearing debt recorded in 54.9 51.3 considerably compared with fiscal 2019. As a result, revenue Profit Attributable to Owners of Parent both current liabilities and non-current liabilities increased 50 decreased by 12%, to ¥564.3 billion ($5,452 million), and ¥ billion by ¥161.7 billion ($1,563 million), or 19%, from the end of the adjusted operating profit amounted to a loss of ¥17.6 billion 2020 (23.3) previous fiscal year, to ¥1,006.2 billion ($9,722 million). ($170 million), compared with a profit of ¥15.0 billion in the 40 2019 240.1 Note: Interest-bearing debt includes bonds and borrowings and lease liabilities. 2016 2017 2018 2019 2020 previous fiscal year. 291.6 2018 IFRS J-GAAP Equity • China, Asia-Pacific 2017 288.3 Total equity was ¥2,195.3 billion ($21,211 million), decreasing In China and the Asia-Pacific region, unit sales of tires for 2016 265.6 by ¥207.2 billion ($2,002 million), or 9%, from the end of the passenger cars and light trucks and unit sales of tires for IFRS J-GAAP previous fiscal year, as the Group recorded loss attributable trucks and buses decreased substantially compared with to owners of parent of ¥23.3 billion ($225 million), due in fiscal 2019. As a result, revenue decreased by 15%, to ¥394.6 part to dividends paid (owners of parent) of ¥91.5 billion billion ($3,813 million), and adjusted operating profit ($884 million). decreased by 32%, to ¥24.6 billion ($238 million), from the As a result, total assets at the end of fiscal 2020 previous fiscal year. amounted to ¥4,189.3 billion ($40,477 million), decreasing by ¥87.7 billion ($847 million), or 2%, from the end of the previous fiscal year. Furthermore, the ratio of equity attrib- utable to owners of parent to total assets for fiscal 2020 was 51.3%, down 3.6 percentage points from the end of the previous fiscal year.

2 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 3 Management’s Discussion and Analysis

Return on Invested Capital Cash Flow property, plant and equipment of ¥200.7 billion ($1,939 Net cash be used primarily to rebuild earning power Net cash provided by operating activities million), compared with ¥270.5 billion in the previous in the Group’s core businesses and to make strategic 2020 2019 2018 2017 2016 ¥ billion fiscal year. growth investments toward expanding the solutions busi- IFRS J-GAAP 2020 526.9 Net cash provided by financing activities totaled ¥18.1 nesses and other exploratory business. At the same time, % of net sales billion ($175 million), compared with net cash use in net cash will be used to maintain an appropriate financial 5.5 7.4 — — — 2019 505.0 financing activities of ¥240.5 in the previous fiscal year. The structure and to provide shareholder returns. 2018 361.0 principal reasons for this increase were proceeds from Net Return on Shareholders’ Equity 2017 418.1 short-term debt of ¥309.4 billion ($2,990 million), compared 2020 2019 2018 2017 2016 with ¥292.9 billion in the previous fiscal year, and proceeds Dividend 2016 444.5 IFRS J-GAAP from long-term debt of ¥116.6 billion ($1,127 million), In determining dividend payments, the Company compre- IFRS J-GAAP % of net sales compared with ¥30 million in the previous fiscal year. These hensively evaluates factors including business results, –1.0 10.0 12.4 12.5 11.8 contributors offset the repayments of short-term debt of financial positions for the relevant fiscal period, medium- ¥248.4 billion ($2,400 million), compared with ¥257.7 billion term earnings forecasts, investment plans, and cash flows. in the previous fiscal year; repayments of lease liabilities of Based on these considerations, the Company strives to live Cash flow ¥57.1 billion ($552 million), compared with ¥55.0 billion in up to the expectations of shareholders by striving to Cash and cash equivalents (hereinafter “net cash”) ($866 million), compared with ¥10.5 billion in the previous the previous fiscal year; dividends paid to owners of parent achieve stable and continuous increases of dividend increased by ¥377.6 billion ($3,649 million) during fiscal fiscal year; decrease in trade and other receivables of ¥56.9 of ¥91.5 billion ($884 million), compared with ¥117.7 billion payments targeting a consolidated payout ratio of 40% by 2020, to ¥810.5 billion ($7,831 million), compared with a billion ($550 million), compared with ¥21.9 billion in the in the previous fiscal year; and dividends paid to non- sustainably enhancing our corporate value. decrease of ¥1.0 billion during the previous fiscal year. previous fiscal year; and decrease in inventories of ¥128.8 controlling interests of ¥7.5 billion ($72 million), compared For the fiscal year ended December 31, 2020, the Net cash provided by operating activities increased by billion ($1,245 million), compared with ¥7.3 billion in the with ¥10.0 billion in the previous fiscal year. Company achieved significant improvement in its adjusted ¥21.9 billion ($212 million) compared with the previous fiscal previous fiscal year. These contributors offset income taxes operating profit and profit compared to the previous forecast. year, to ¥526.9 billion ($5,091 million). The principal reasons paid of ¥71.7 billion ($693 million), compared with ¥79.6 Capital financing and liquidity During fiscal 2020, the Company paid an interim dividend for this increase include profit before tax of ¥29.3 billion billion in the previous fiscal year. In addition to borrowings from financial institutions, the of ¥50.0 ($0.48) and a year-end dividend of ¥60.0 ($0.58) ($283 million), compared with ¥335.5 billion in the previous Net cash used in investing activities decreased by ¥106.5 Companies will continue to diversify their means of per share, totaling ¥110.0 ($1.06) per share for the year. fiscal year; depreciation and amortization of ¥267.5 billion billion ($1,029 million) compared with the previous fiscal procuring funds, which include direct financing, such as ($2,584 million), compared with ¥269.7 billion in the year, to ¥155.4 billion ($1,501 million). One of the principal domestic straight bonds and commercial paper, securitiza- previous fiscal year; impairment losses of ¥89.6 billion reasons for this decrease was payments for purchase of tion of receivables, and utilization of leases in an effort to diversify risks and minimize interest costs.

Eleven-Year Summary

Bridgestone Corporation and Subsidiaries Years ended December 31

2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 IFRS J-GAAP J-GAAP

Millions of yen, except per share data and financial ratios Millions of yen, except per share data and financial ratios Revenue ¥2,994,524 ¥ 3,507,243 ¥ 3,650,111 ¥ 3,643,428 ¥ 3,337,017 ¥ 3,790,251 ¥ 3,673,965 ¥ 3,568,091 ¥ 3,039,738 ¥ 3,024,356 ¥ 2,861,615 Adjusted operating profit 222,932 343,122 402,732 419,047 449,549 517,248 478,038 438,132 285,995 191,322 166,450 Profit (loss) attributable to owners of parent (23,301) 240,111 291,642 288,276 265,551 284,294 300,589 202,054 171,606 102,970 98,914 Total equity 2,195,291 2,402,477 2,436,162 2,402,739 2,345,900 2,282,012 2,146,658 1,862,964 1,417,348 1,165,672 1,176,147 Total assets 4,189,327 4,277,016 3,840,270 3,959,039 3,716,030 3,795,847 3,960,908 3,577,045 3,039,799 2,677,344 2,706,640 Ratio of equity attributable to owners of parent to total assets 51.3 54.9 61.9 59.2 61.5 58.2 52.4 50.5 45.2 42.2 42.2 Per share in yen: Net income (loss) Basic (33.09) 332.31 387.95 375.67 339.04 362.99 383.84 258.10 219.26 131.56 126.19 Diluted (33.09) 331.76 387.28 375.01 338.52 362.52 383.39 257.81 219.10 131.50 126.16 Equity attributable to owners of parent per share 3,053.35 3,336.92 3,163.71 3,115.69 2,915.85 2,820.48 2,650.47 2,305.64 1,754.30 1,444.53 1,458.01 Cash dividends 110.00 160.00 160.00 150.00 140.00 130.00 100.00 57.00 32.00 22.00 20.00 Capital expenditure 271,900 328,159 268,421 234,850 194,111 253,581 296,396 274,862 245,644 201,390 182,648 Depreciation and amortization 267,454 269,749 200,477 200,377 188,062 202,334 188,333 176,180 155,066 158,044 170,663 Research and development expenses 95,205 106,202 103,551 99,792 95,403 94,978 94,147 89,098 82,801 83,982 85,154

Note: Solely for the convenience of readers, the amounts in this annual report are translated into U.S. dollars at the rate of ¥103.50 to $1, the approximate year-end rate.

4 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 5 Operational Risks

The status of the Companies as documented in this report is the Companies’ mining, manufacturing, and construction as earthquakes and floods, wars, terrorist actions, civil Information Technology (IT) Systems Failures subject to diverse risks from both operational and solutions businesses—and for certain products, such as strife, boycotts, epidemics, energy supply problems, and The complex operations of the Companies are increasingly accounting perspectives. This section provides an overview conveyor belts, is affected by businesses in the resource general social or political unrest. Such events have the dependent on the smooth, round-the-clock functioning of of the major categories of risk that may have a bearing on industries and in the civil engineering and construction potential to adversely affect the operating results and various computing and IT systems. Failure of such technical investors’ decisions. industries. Trends in those business conditions that might financial position of the Companies. systems due to external causes, such as natural disasters, Management is aware of these risks, and systematic cause demand to decline, or to grow at a slower rate, could Also, factors such as abrupt, substantial fluctuations in cyberattcks, or through human error, could result in the halt efforts are made to prevent or minimize the impact of adversely affect the operating results and financial position political or economic matters in Japan or overseas could of major operations and services and theft or leakage of related adverse events on operations. Nonetheless, the of the Companies. hinder the continuation of the Companies’ business activi- confidential or personal information and data, with the potential exists for unforeseen or unpredictable events Moreover, demand for winter tires (which make a sizable ties. Such events have the potential to affect the possibility of hindering further business activities. Such related to the risk factors described below to affect the contribution to sales in regions such as Japan, Europe, and Companies’ operating results and financial position. incidents bear the potential to damage the Companies’ operations, business results, and financial position of the North America) is closely related to seasonal weather The risk of earthquakes is particularly high in Japan image and lower social trust, with adverse effects on Companies. All references to possible future developments trends. A mild winter and a decline in demand in these where the Companies have numerous key facilities. performance and financial standing. The Companies have in the following text are as of March 26, 2021. regions could adversely affect to some extent the oper- Management systematically promotes the seismic rein- instituted comprehensive measures to safeguard IT and ating results and financial position of the Companies. forcement of the Companies’ facilities in Japan based on an computing systems and related data, and to upgrade Major Categories of Operational Risk order of priority determined from the results of site anal- network security on an ongoing basis in order to prevent Demand and macroeconomic conditions Legal, regulatory, and litigation risk yses using seismic diagnostics. In addition, a business systemic failures. The Companies conduct research and development (R&D), The Companies’ operations around the world are subject to continuity plan (BCP) has been created in order to facilitate purchasing, manufacturing, logistics, marketing, sales, diverse national (and, in Europe, supranational) laws and a swift response to an earthquake and the early restoration Industrial Action procurement, and other functional activities on a global regulations, including trade, investment, foreign exchange of operations. Operation of this BCP is subject to regular Prolonged strikes or other industrial action could cause basis. Operating results and financial position are thus transactions, taxation systems (including transfer pricing), review and improvement. The Companies have also formu- operational disruptions, and thereby adversely affect the subject to trends in demand, interest rates, exchange rates, anticompetitive practices, environmental protection, and lated a BCP designed to prioritize the wellbeing and safety operating results and financial position of the Companies. share prices, and other economic variables in different protection of personal information. of employees, families, and all related people while mini- Management strives to minimize the risk of labor unrest by countries and regions. In fiscal 2020, the consolidated Laws and regulations that affect the Companies’ busi- mizing Company losses stemming from the spread of H1N1 fostering good labor management relations throughout revenue split by market (for external customers only) was ness activities have been established and introduced. These influenza, COVID-19, and other diseases caused by unknown global operations. 46% from operations in the Americas; 21% from Europe, include labeling systems and regulations regarding tire pathogens. The content of this BCP is continuously Russia, the Middle East, India and Africa; 19% from Japan; performance and regulations regarding chemicals in Japan expanded based on feedback from its implementation. Risks related to climate change and 14% from China, Asia-Pacific. An economic downturn and overseas. Accordingly, new or revised laws and regula- Despite the preventive measures, such serious risks Amid growing global interest in climate change and an in any of these regions could exert a major adverse effect tions could limit the scope of business activities, raise could disrupt or reduce the scale of operations or cause accelerated move toward a low-carbon society as repre- on the operating results and financial position of the operating costs, or otherwise adversely affect the oper- damage to facilities, necessitating expensive repairs or sented by the Paris Agreement, the Companies recognize Companies. ating results and financial position of the Companies. restoration work. The costs involved could adversely affect the risks and opportunities related to climate change and The Companies’ business is closely tied to the automo- The Companies could be subject to lawsuits or to investi- the Companies’ operating results and financial position. reflect them in their business strategy. These risks include bile industry, therefore, the operating results and financial gations by governmental authorities in regard to their Operational disruptions at those plants where the stronger typhoons and increased frequency of flooding and position of the Companies are strongly affected by business business activities in Japan or in overseas markets. In the production of certain products or materials is concentrated drought, which pose the risk of interrupting business activi- conditions in the global automobile industry. Demand for event that an important lawsuit is filed or investigation by have the potential to cause greater problems due to the ties. There are also risks related to the procurement of raw replacement tires in each country where the Companies governmental authorities has commenced, the Companies’ increased possibility of a supply interruption, which could materials as a result of changing rainfall patterns leading to operate depends on national trends in consumer spending, operating results and financial position could be affected. result in claims for compensation based on breach of supply poor harvesting of natural rubber. Furthermore, reduced automotive fuel prices, and a range of other local market contracts, or in an erosion of customer confidence in the snowfall bears the risk of lowering demand for winter tires. variables. Any combination of trends that might cause Operational Disruptions Companies as a reliable source of supply. Any such develop- Moreover, climate change has led to the ongoing introduc- demand for replacement tires to decline, or to grow at a Natural disasters, wars, terrorist actions, civil strife, and ments could have a significantly adverse impact on the tion of systems and regulations related to carbon taxes, slower rate, could adversely affect the operating results social and political unrest operating results and financial position of the Companies. reduction obligations for CO2 emissions, emissions trading and financial position of the Companies. Globally dispersed operations expose the Companies to a schemes, and fuel-efficient tires in Japan and overseas. Demand for large and ultra-large off-the-road radial tires broad range of natural and man-made risks that could for construction and mining vehicles—which are the core of constitute force majeure, including natural disasters, such

6 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 7 Operational Risks

If the R&D expenses required to meet the changing Companies employ foreign currency forward contracts to Product defects guarantee that price rises can always be passed on to needs of clients and customers do not produce sufficient hedge foreign currency-denominated trade receivables and The Companies hold customer safety as their highest customers or that ongoing efforts to raise productivity will results, the Companies’ operating results and financial payables, and currency swaps to hedge foreign currency- priority. The Companies invest considerable resources in be sufficient to compensate for any sharp increases in raw position may be adversely affected in ways that include denominated loans and borrowings in an effort to minimize establishing and maintaining high quality standards for all materials costs. limitations on business activities and increased costs. the effects of short-term exposure to exchange rate fluc- products manufactured and sold. Management is particu- Based on the Companies’ awareness of the risks and tuations. However, hedging cannot insulate the Companies’ larly sensitive to the importance of quality assurance in Pension costs and obligations opportunities surrounding climate change, the Companies operations completely from foreign exchange market tires and other products closely associated with human Pension-related costs and obligations are reliant on actu- have set a long-term goal for 2050 of becoming carbon trends since these operations include extensive import and safety. The Companies have honed their collective quality arial assumptions concerning discount rates and a number neutral, with targets set for 2030 to 1) reduce absolute CO2 export activities worldwide. Fluctuations in exchange rates assurance capabilities by upgrading information systems of other variables. If these assumptions were to change emissions (Scope 1*1 and 2*2) by 50% compared with 2011 can thus have an adverse effect on the operating results related to product performance, collecting pertinent significantly as a result of changes in interest rates or the levels and 2) contribute to a global CO2 emissions reduction and financial position of the Companies. market information, and establishing systems to provide fair value of plan assets (including pension assets), or other across the lifecycles and value chains (Scope 3*3) of the Exchange rate fluctuations also affect the consolidated early warning of any potential safety issues that may arise factors were to necessitate a change in the underlying Companies’ products and services that exceeds five times performance of the Companies because results are before they become problems. assumptions, there could be an increase in pension-related the amount of CO2 emissions generated by the Companies’ reported in yen. Changes in exchange rates affect the Nonetheless, such efforts cannot guarantee a zero level costs and obligations, as well as a material impact on the operations by 2030. The Companies are working to meet values recorded for revenue, expenses, assets, and liabili- of product defects or eliminate the chance of an extensive operating results and financial position of the Companies. these targets with efforts that include developing new ties in all countries outside Japan when translated into yen. product recall because product defects could occur due to technology that helps reduce CO2 emissions, reducing emis- In general terms, yen appreciation against other leading unpredictable factors. Any such defects or recalls could Intellectual property sions at production bases, and promoting the development currencies tends to depress the financial results, while yen result in customer claims for damages, as well as associated The Companies treat intellectual property as an important and sales of fuel-efficient tires. depreciation tends to have a favorable impact. litigation costs, replacement costs, and damage to the business resource. Systematic efforts are made to employ Companies’ reputation. Product liability claims, class-action intellectual property effectively in improving the competi- *1 CO2 emissions produced directly by a company (boilers at company factories, Competition etc.) lawsuits, and other litigation pose a particular risk in the U.S. tive position of the Companies, to protect intellectual *2 Indirect CO2 emissions generated from the production of energy by an The Companies encounter numerous competitors across property rights from infringement, and to avoid infringing external provider and then utilized by a company their entire product lineup. Competitive price pressures Raw materials procurement the intellectual property rights of other parties. *3 CO2 emissions produced throughout a product’s lifecycle, including procurement of raw materials, logistics, customer use, and disposal/recycling have the potential to adversely affect the operating results Disruption of supplies of raw materials has the potential to Despite such safeguards, any actual or alleged infringe- and financial position of the Companies. In addition, the affect performance adversely. The Companies use large ment of third-party intellectual property rights by the Corporate and brand image Companies face a constant risk of demands for price reduc- quantities of natural rubber in tires and other rubber prod- Companies could have a negative impact on the use of The Companies strive to enhance their corporate and brand tions from large corporate clients. ucts, most of which are supplied from Southeast Asia. certain materials or technologies by the Companies, and image consistently through global business activities. The Companies strive to maintain profitability in the face The availability of natural rubber supplies in quantities could potentially also trigger the payment of compensatory Systematic efforts are made to ensure compliance with all of downward price pressures by continually seeking to raise sufficient for manufacturing purposes is subject to disrup- damages. Any such outcome could have a negative effect applicable laws and regulations and to promote the highest productivity, enhance brand image, develop new markets, tion due to natural disasters, wars, terrorist actions, civil on the operating results and financial position of the ethical standards. Programs are in place across the Compa- and launch new products that provide greater value to strife, and other social or political unrest, in addition to the Companies. nies to prevent industrial incidents, particularly fires and customers. However, management cannot guarantee that threat of poor harvests. Supply shortages or capacity Conversely, if claims by the Companies of intellectual any accidents that could cause occupational injuries, and such efforts will always be sufficient to offset the effects of constraints are also potential problems with other basic property rights infringement against third parties are not to respond immediately to any accidents that occur. competition. raw materials. upheld, the Companies could also suffer direct or indirect Despite such preventive measures, serious ethical lapses The Companies’ strategy is based on maintaining a The Companies rely on in-house upstream raw materials losses through the diminished differentiation or competi- or industrial accidents, which are by their nature unpredict- highly competitive technological edge. The Companies operations and on third-party suppliers for important raw tiveness of their products in global markets. able, have the potential to adversely affect the operating target the development and introduction of products materials. Any disruption of activity to those operations or results and financial position of the Companies by damaging equipped with new and advanced technologies, and then suppliers and any other events that impede the Companies’ the image and reputation of the Companies, diminishing aim to persuade customers of the value inherent in such plants that use those raw materials could adversely affect the general public’s confidence in the Companies, or leading technical advances to secure prices sufficient to ensure the Companies’ operating results and financial position. to a drop in share price. that profits fully offset the costs of development. Fierce Increases in the costs of raw materials due to tight supply, competition in various fields can sometimes prevent the trade for speculative purposes, and other reasons are also Currency risk Companies from recovering development costs through potentially detrimental to the operating results and finan- The global distribution of the Companies’ R&D, manufac- pricing, which can also have an adverse effect on operating cial position of the Companies. Management cannot turing, logistics, marketing, and sales facilities requires results and financial position. business transactions in numerous currencies. The

8 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 9 Remuneration for Directors and Executive Officers

The policy and process for determining remuneration for directors and executive officers is as follows. The remuneration composition ratio is set with reference to cases overseas, especially in U.S. and European markets, which 1. The policy for setting remuneration for directors and executive officers: are of particular importance to the Company’s business. However, as a general rule, the ratio of performance-based remu- Principles of Remuneration neration within total remuneration is higher for higher-ranking positions, where there is a greater responsibility toward Attract and cultivate superior talent performance and corporate value. The following table represents the composition ratio of remuneration for members of the Support a competitive remuneration level Board of Directors who concurrently conduct business execution and executive officers when performance-based remunera- Provide motivation for the execution of business strategies tion is within the standard range, with the exact ratio depending on rank. The percentages may not apply when members of Provide motivation for enhancing shareholder value the Board of Directors or executive officers hold concurrent positions as executives of subsidiaries and receive remuneration from those subsidiaries. Setting remuneration The Company sets remuneration for members of the Board of Directors and executive officers based on the Company’s Fixed remuneration Variable remuneration (performance-based) performance results and business size and it is commensurate with roles and the level of responsibilities undertaken. The Monthly remuneration Short-term incentives Long-term incentives policy is structured to consider the remuneration levels of other major global companies in Japan which were selected for (base remuneration and additional payment (Groupwide, performance-based bonus (performance-based stock for members of the Board of Directors plus performance-based bonus in comparison from the point of view of sales volume, overseas sales ratio, and operating profit ratio. compensation plan) with concurrent duties) area of responsibility) 24%–31% 30%–45% 31%–39% Remuneration Composition

Item Description • Monthly cash remuneration determined based on responsibilities and job Base remuneration description Reasons for Selecting Performance Indicators • Remuneration for members of the Board who do not Additional allowance for members of • Monthly cash remuneration for executive officers who serve concurrently as After discussions and deliberations among the Compensa- concurrently conduct business execution is fixed and Fixed the Board of Directors with concurrent duties members of the Board of Directors based on their role and responsibilities tion Committee, it was decided that an appropriate director comprises base remuneration plus an allowance for the remuneration • Monthly cash remuneration for an outside director based on their role and Additional allowance for chairpersons incentive program would include a performance-based members of the Board in the position of chairperson or the responsibilities as chairperson of the Board of Directors bonus, with adjusted operating profit used as an indicator of chair of a committee. The policy is structured to consider • Monthly cash remuneration for an outside director based on their role and Additional allowance for committee chairs responsibilities as chairperson of a committee short-term performance, in addition to performance-based the recipient’s contributions toward mid- to long-term busi- Performance-based bonus (Groupwide) • Cash remuneration paid at the end of the fiscal year stock compensation. A combination of consolidated ROE ness performance and the enhancement of corporate value • With adjusted operating profit* used as an indicator, payment amounts are and consolidated ROIC, both of which are performance indi- by overseeing the management and operations of the determined according to the degree to which targets are achieved. Type A cators that comprise the numerical targets for the Mid-Term Company without actually being involved in day-to-day • 80% of Groupwide performance-based bonus (Determined by Business Plan, serve as indicators for performance-based operations. “Members of the Board of Directors who do not quantitative evaluation) • If the Compensation Committee sets remuneration for each position at 100% (the standard amount), the actual payout may range from 0% to 150% of the stock compensation. These indicators were chosen for their concurrently conduct business execution” refers to outside standard amount, depending on business performance. ability to assess business strategy and compensation incen- directors, as well as internal directors who audit the execu- • Remuneration reflecting the degree of contribution to improving corporate tives, for their continuity as an indicator, and for ease of tion of duties by executive officers and members of the value, including Companywide performance and value from a mid-term Type B perspective, as discussed and decided by the Compensation Committee explanation to stakeholders. Board of Directors. Variable remuneration (performance-based) (Determined by qualitative • 20% of Groupwide performance-based bonus evaluation) • If the Compensation Committee sets remuneration for each position at 100% Remuneration for members of the Board of Directors Remuneration for executive officers (the standard amount), the actual payout may range from 80% to 120% of the standard amount, depending on business performance. • Remuneration for members of the Board of Directors who • Remuneration for executive officers comprises fixed and • Cash remuneration paid at the end of the fiscal year concurrently conduct business execution comprises fixed variable components. • Payment amount is determined according to the degree of achievement and variable components. Fixed remuneration comprises base remuneration, whereas within recipient’s area of responsibility. Performance-based bonus Fixed remuneration is made up of base remuneration and variable remuneration is made up of a Groupwide perfor- (area of responsibility) • If the Compensation Committee sets remuneration for each position at 100% remuneration for additional duties. mance-based bonus, a performance-based bonus in the (the standard amount), the actual payout may range from 80% to 130% of the standard amount, depending on business performance in the recipient’s area Variable remuneration consists of a Groupwide perfor- officer’s area of responsibility, and the PSU plan. of responsibility. mance-based bonus and the Performance Share Unit • Remuneration provided for motivation to contribute toward achievement of mid-term performance targets and the improvement of corporate value, in (PSU) plan, which is a performance-based stock compensa- addition to morale and shared value with shareholders tion plan. • Stock-based compensation issued according to business results over a three-year period Performance-based Performance Share Units (PSUs) stock compensation • With consolidated ROIC and consolidated ROE used as indicators, the number of shares given is determined based on the degree to which targets are reached. • Remuneration is split 50-50 between monetary payment and shares at time of delivery, with consideration given to income tax amounts borne by the recipient. * To coincide with the voluntary adoption of IFRS beginning in fiscal 2020, adjusted operating profit has been adopted as an indicator instead of operating income, which is used under JGAAP. Under IFRS, adjusted operating profit is determined by adding or subtracting certain adjustment items to or from pre-adjusted metrics. (Adjusted items) Business and plant restructuring income and expenses, impairment losses, loss on disaster, insurance claim income, and other gains and losses with huge amounts related to one time event.

10 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 11 Stock Holdings

Standards and approach for classification of equity investments Information on the number of specific investments and deemed shareholdings by security, and the amount recorded The Company distinguishes between equity investments for pure investment purposes—shares held for gaining profit on the balance sheet through changes in share value and dividends—and strategic shareholdings, which are all other shares held in accordance with the Company shareholding policy. The Company does not hold any equity investments for pure investment purposes. Specific Investments (Stock) Fiscal year Previous under review fiscal year

Equity investments held for purposes other than pure investment Number of shares Ownership of the Shareholding policy and method for checking rationale for holding as well as details regarding verification of the Balance sheet amount Purpose of holding, quantitative effect of holding,*1 Company’s appropriateness of holding shares for each individual security performed by the Board of Directors and other parties Name (millions of yen) and reasons for the increase in the number of shares shares 1. Shareholding policy for strategic shareholdings JSR CORPORATION 6,525,160 6,441,160 Maintain/strengthen business and collaborative relationships Yes Reason for increase in the number of shares: consolidation of The Company defines strategic shareholdings as holdings that contribute toward increased corporate value and are held out shares held by Group companies 18,753 12,959 of necessity from a business strategy perspective or with the goal of maintaining or strengthening relationships with busi-

nesses or collaborative industries and are not held for reasons outside of this definition. MOTOR CORPORATION 1,959,890 1,959,890 Maintain/strengthen business and collaborative relationships Yes 15,595 15,118 2. Verifying appropriateness of strategic shareholdings NOKIAN TYRES PLC 4,167,653 4,167,653 Business strategy No The Company confirms the appropriateness of its holdings on an annual basis, including an assessment of securities for 15,248 13,089 which there are holdings, number of shares held, holding ratios, and other factors. These assessments are then verified by TOYO TIRE CORPORATION 5,000,000 5,000,000 Maintain/strengthen business and collaborative relationships Yes the Board of Directors. Appropriateness of holding is determined by operating divisions involved in business execution in 7,840 7,875 accordance with the shareholding policy of the Company, taking into account the objectives, the impact of holding shares, and the cost of capital and other relevant factors for each individual stock listing. Shareholdings that are not judged as SUMITOMO FINANCIAL GROUP, INC. 562,224 562,224 Business strategy Yes appropriate based on the results of this verification process are reduced after establishing a dialogue and gaining the 1,792 2,270 understanding of the business partner for the holding in question. As a result, the number of strategic shareholdings is UFJ FINANCIAL GROUP, INC. 2,780,580 2,780,580 Business strategy Yes decreased year on year. 1,268 1,649 FUJI KYUKO CO., LTD. 244,510 244,510 Maintain/strengthen business and collaborative relationships No 1,177 1,033 Number of securities and balance sheet amounts YELLOW HAT LTD. 527,076 527,076 Maintain/strengthen business and collaborative relationships Yes Number of securities Balance sheet amounts (millions of yen) 884 1,032 Unlisted shares 45 683 OTSUKA HOLDINGS CO., LTD. 200,000 400,000 Maintain/strengthen business and collaborative relationships No Shares other than unlisted shares 35 69,631 884 1,953 FUKUYAMA TRANSPORTING CO., LTD. 200,162 200,162 Maintain/strengthen business and collaborative relationships No (Securities for which the number of shares was increased during the fiscal year under review) 870 798

Total acquisition price for the increase in Reason for increasing NISHI-NIPPON RAILROAD CO., LTD. 212,237 212,237 Maintain/strengthen business and collaborative relationships No Number of securities the number of shares (millions of yen) number of shares 646 534 Transferred from subsidiary shares as Unlisted shares 1 — a result of business restructuring SEINO HOLDINGS CO., LTD. 391,229 391,229 Maintain/strengthen business and collaborative relationships No Consolidation of shares held by Group 569 577 companies in order to maintain and KINTETSU GROUP HOLDINGS CO., LTD. 124,281 124,281 Maintain/strengthen business and collaborative relationships No Shares other than unlisted shares 1 195 strengthen stock trading and 562 735 collaborative relationships CO., LTD. 313,632 313,632 Maintain/strengthen business and collaborative relationships No 448 539 (Securities for which the number of shares was decreased during the fiscal year under review) IDEMITSU KOSAN CO., LTD. 171,200 171,200 Maintain/strengthen business and collaborative relationships No Total selling price related to the decrease in 389 518 Number of securities the number of shares (millions of yen) ISEKI & CO., LTD. 270,970 270,970 Maintain/strengthen business and collaborative relationships Yes Unlisted shares 3 36 Shares other than unlisted shares 13 19,979 375 452 SENKO GROUP HOLDINGS CO., LTD. 366,888 366,888 Maintain/strengthen business and collaborative relationships No 369 342 NIIGATA KOTSU CO., LTD. 163,870 163,870 Maintain/strengthen business and collaborative relationships No 334 342 , INC.*2 212,072 3,534,528 Business strategy Yes 277 594 INOUE RUBBER (THAILAND) PUBLIC CO., LTD. 5,246,500 6,235,000 Maintain/strengthen business and collaborative relationships No 256 350

12 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 13 Stock Holdings

Fiscal year Previous Fiscal year Previous under review fiscal year under review fiscal year

Number of shares Ownership Number of shares Ownership of the of the Balance sheet amount Purpose of holding, quantitative effect of holding,*1 Company’s Balance sheet amount Purpose of holding, quantitative effect of holding,*1 Company’s Name (millions of yen) and reasons for the increase in the number of shares shares Name (millions of yen) and reasons for the increase in the number of shares shares SANKYU INC. 51,514 51,514 Maintain/strengthen business and collaborative relationships No EPCO CO., LTD.*3 — 40,000 — No 201 283 — 58 HANKYU HANSHIN HOLDINGS, INC. 57,983 57,983 Maintain/strengthen business and collaborative relationships No CONSTRUCTION MACHINERY — 10,000 — No CO., LTD.*3 199 271 — 32 SAN-AI OIL CO., LTD. 153,550 153,550 Maintain/strengthen business and collaborative relationships No COCA-COLA BOTTLERS JAPAN HOLDINGS — 9,810 — No INC.*3 172 183 — 27 ELECTRIC RAILWAY CO., LTD. 120,000 120,000 Maintain/strengthen business and collaborative relationships No TONAMI HOLDINGS CO., LTD.*3 — 3,150 — No 118 134 — 17 ENEX CO., LTD. 101,386 101,386 Maintain/strengthen business and collaborative relationships No AUTOWAVE CO., LTD.*3 — 5,000 — No 103 93 — 0

CENTRAL JAPAN RAILWAY COMPANY 5,000 5,000 Maintain/strengthen business and collaborative relationships No *1 Although the quantitative effect of holding shares for each security is not published for the purpose of business confidentiality, the appropriateness of each individual 73 110 holding is determined by operating divisions involved in business execution in accordance with the shareholding policy of the Company, taking into account the cost of capital and other relevant factors, and is then verified by the Board of Directors. MIE KOTSU GROUP HOLDINGS, INC. 121,536 121,536 Maintain/strengthen business and collaborative relationships No *2 MIZUHO FINANCIAL GROUP, INC. implemented a 1-for-10 share consolidation on October 1, 2020 . *3 A dash (“—”) signifies that there are no holdings for the security in question. 60 75 NISSIN SHOJI CO., LTD. 50,000 50,000 Maintain/strengthen business and collaborative relationships No Deemed Shareholdings 46 44 Not applicable. DAIWA MOTOR TRANSPORTATION CO., LTD. 42,000 42,000 Maintain/strengthen business and collaborative relationships No 38 48 Equity investments for pure investment purposes S LINE CO., LTD. 29,700 29,700 Maintain/strengthen business and collaborative relationships No Not applicable. 27 30 Equity investments for which the purpose of holding was changed from pure investment purposes during the fiscal year AIR WATER INC. 10,000 10,000 Maintain/strengthen business and collaborative relationships No under review 18 16 Not applicable. KAMEI CORPORATION 12,100 12,100 Maintain/strengthen business and collaborative relationships No 14 16 SAKAI HEAVY INDUSTRIES, LTD. 5,808 5,808 Maintain/strengthen business and collaborative relationships No 14 17 CORPORATION 5,000 5,000 Maintain/strengthen business and collaborative relationships No 8 9 DAIYA TSUSHO CO., LTD. 2,000 2,000 Maintain/strengthen business and collaborative relationships No 5 3 MOTOR CO., LTD.*3 — 5,756,450 — Yes — 17,839 , LTD. *3 — 1,817,910 — No — 2,112 MAZDA MOTOR CORPORATION*3 — 1,634,000 — No — 1,532 CO., LTD.*3 — 104,500 — Yes — 670 HITACHI TRANSPORT SYSTEM, LTD.*3 — 121,000 — No — 372

14 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 15 Consolidated Statement of Financial Position

As of December As of December As of January 1, 2019 As of December As of December As of December As of January 1, 2019 As of December Notes 31, 2020 31, 2019 (Transition date) 31, 2020 Notes 31, 2020 31, 2019 (Transition date) 31, 2020

Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Assets Liabilities and equity Current assets Liabilities Cash and cash equivalents 8 ¥ 810,546 ¥ 432,924 ¥ 433,916 $ 7,831,361 Current liabilities Trade and other receivables 9, 34 667,761 755,344 781,916 6,451,800 Trade and other payables 19, 34 ¥ 420,140 ¥ 453,069 ¥ 497,173 $ 4,059,319 Inventories 10 491,240 630,162 645,924 4,746,278 Bonds and borrowings 20, 34 293,978 135,442 191,556 2,840,365 Other financial assets 11, 34 7,277 14,311 25,867 70,313 Lease liabilities 20, 34 53,966 52,827 52,097 521,412 Other current assets 12 76,279 80,643 78,435 736,999 Income taxes payable 34,978 51,506 35,404 337,954 Subtotal 2,053,104 1,913,385 1,966,059 19,836,752 Other financial liabilities 20, 34 29,342 27,628 24,996 283,498 Non-current assets held for sale 13 1,425 5,023 1,788 13,767 Provisions 21 64,806 34,931 33,080 626,147 Total current assets 2,054,529 1,918,408 1,967,847 19,850,519 Other current liabilities 22 144,526 138,980 123,190 1,396,385 Non-current assets Subtotal 1,041,736 894,383 957,495 10,065,080 Property, plant and equipment 14, 16, 20 1,392,141 1,555,170 1,515,042 13,450,642 Liabilities directly associated with non-current assets held for sale 13 12 953 — 117 Right-of-use assets 17 290,122 298,569 322,670 2,803,109 Total current liabilities 1,041,748 895,336 957,495 10,065,197 Goodwill 15, 16 97,646 98,346 41,382 943,440 Non-current liabilities Intangible assets 15, 16 117,481 113,664 49,710 1,135,086 Bonds and borrowings 20, 34 412,060 405,514 209,977 3,981,252 Investments accounted for using equity method 16 24,543 47,071 48,014 237,127 Lease liabilities 20, 34 246,187 250,685 271,179 2,378,616 Other financial assets 11, 34 113,222 140,462 217,306 1,093,937 Other financial liabilities 20, 34 13,937 12,937 11,824 134,656 Deferred tax assets 18 49,409 60,711 57,379 477,382 Retirement benefit liabilities 23 191,679 211,619 207,928 1,851,971 Other non-current assets 12, 23 50,234 44,616 33,327 485,350 Provisions 21 23,730 23,348 24,212 229,271 Total non-current assets 2,134,798 2,358,608 2,284,830 20,626,072 Deferred tax liabilities 18 28,491 44,243 46,613 275,274 Total assets ¥4,189,327 ¥4,277,016 ¥4,252,677 $40,476,592 Other non-current liabilities 36,205 30,856 29,077 349,809 Total non-current liabilities 952,288 979,203 800,810 9,200,849 Total liabilities 1,994,036 1,874,539 1,758,306 19,266,046 Equity Common stock 24 126,354 126,354 126,354 1,220,812 Capital surplus 24 122,116 121,998 121,998 1,179,867 Treasury stock 24 (38,657) (232,330) (32,648) (373,493) Other components of equity 24 (59,851) 42,661 118,815 (578,274) Retained earnings 24 1,999,996 2,290,696 2,105,280 19,323,633 Total equity attributable to owners of parent 2,149,958 2,349,378 2,439,799 20,772,545 Non-controlling interests 45,333 53,099 54,572 438,001 Total equity 2,195,291 2,402,477 2,494,371 21,210,545 Total liabilities and equity ¥4,189,327 ¥4,277,016 ¥4,252,677 $40,476,592

16 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 17 Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income

Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Notes December 31, 2020 December 31, 2019 December 31, 2020 Notes December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Revenue 6, 26 ¥2,994,524 ¥3,507,243 $28,932,599 Profit (loss) ¥ (19,731) ¥246,291 $ (190,634) Cost of sales 10, 14, 15, 23 1,906,553 2,182,554 18,420,799 Gross profit 1,087,971 1,324,689 10,511,801 Other comprehensive income Selling, general and administrative expenses 14, 15, Items that will not be reclassified to profit or loss 23, 27, 33 907,200 998,360 8,765,217 Net change in fair value of financial assets measured through other Other income 28 32,019 47,606 309,364 comprehensive income 30, 34 1,708 6,121 16,504 Other expenses 16, 23, 28 148,676 24,599 1,436,487 Remeasurements of defined benefit plans 23, 30 5,478 2,749 52,927 Operating profit 64,114 349,336 619,460 Share of other comprehensive income of investments accounted for using equity method 30 (140) (6) (1,349) Finance income 29 8,431 17,748 81,457 Total of items that will not be reclassified to profit or loss 7,046 8,864 68,082 Finance costs 23, 29 23,654 28,324 228,542 Impairment loss related to shares using equity method 16 18,196 — 175,803 Items that may be reclassified to profit or loss Share of profit (loss) of investments accounted for using equity method (1,429) (3,251) (13,809) Exchange differences on translation of foreign operations 30 (94,748) (16,191) (915,436) Profit before tax 29,266 335,510 282,764 Effective portion of change in fair value of cash flow hedges 30 79 (864) 763 Income tax expense 18 48,997 89,219 473,397 Share of other comprehensive income of investments accounted for Profit (loss) (19,731) 246,291 (190,634) using equity method 30 (1,747) (2,105) (16,876) Total of items that may be reclassified to profit or loss (96,415) (19,159) (931,549) Profit (loss) attributable to Owners of parent (23,301) 240,111 (225,134)

Non-controlling interests 3,571 6,179 34,500 Other comprehensive income, net of tax (89,369) (10,295) (863,467) Profit (loss) ¥ (19,731) ¥ 246,291 $ (190,634)

Comprehensive income (109,099) 235,995 (1,054,101) Earnings (loss) per share Comprehensive income attributable to Basic earnings (loss) per share (Yen) 31 ¥ (33.09) ¥ 332.31 Owners of parent (108,005) 227,517 (1,043,525) Diluted earnings (loss) per share (Yen) 31 (33.09) 331.76 Non-controlling interests (1,095) 8,478 (10,576) Comprehensive income ¥(109,099) ¥235,995 $(1,054,101) Earnings (loss) per share Basic earnings (loss) per share (U.S. dollars) 31 $ (0.32) Diluted earnings (loss) per share (U.S. dollars) 31 (0.32)

18 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 19 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows

Fiscal year ended December 31, 2020 Fiscal year ended Fiscal year ended Fiscal year ended Equity attributable to owners of parent Note December 31, 2020 December 31, 2019 December 31, 2020

Other components of equity Millions of yen Thousands of U.S. dollars Net change in fair value of Cash flows from operating activities Exchange Effective financial assets Remeasure- differences portion of measured ments Stock on translation change in fair through other of defined Non- Profit before tax ¥ 29,266 ¥ 335,510 $ 282,764 Common Capital Treasury acquisition of foreign value of cash comprehen- benefit Retained controlling Note stock surplus stock rights operations flow hedges sive income plans Total earnings Total interests Total Depreciation and amortization 267,454 269,749 2,584,101 Millions of yen Impairment losses 89,622 10,542 865,910 Balance at January 1, 2020 ¥126,354 ¥121,998 ¥(232,330) ¥3,275 ¥ (18,968) ¥(325) ¥58,678 ¥ — ¥ 42,661 ¥2,290,696 ¥2,349,378 ¥53,099 ¥2,402,477 Profit (loss) — — — — — — — — — (23,301) (23,301) 3,571 (19,731) Increase (decrease) in retirement benefit liabilities (13,196) 2,710 (127,497) Other comprehensive income — — — — (93,289) 315 1,706 6,564 (84,703) — (84,703) (4,665) (89,369) Interest and dividend income (7,598) (16,626) (73,414) Total comprehensive income — — — — (93,289) 315 1,706 6,564 (84,703) (23,301) (108,005) (1,095) (109,099) Interest expenses 13,426 16,020 129,721 Purchase of treasury stock 24 — — (3) — — — — — — — (3) — (3) Foreign currency exchange loss (gain) 4,905 5,152 47,392 Disposal of treasury stock 24 — — 193,677 (150) — — — — (150) (193,526) 0 — 0 Impairment loss related to shares using equity method 18,196 — 175,803 Dividends 25 — — — — — — — — — (91,531) (91,531) (7,507) (99,037) Changes in ownership Share of loss (profit) of investments accounted for using equity method 1,429 3,251 13,809 interests of owners in subsidiaries under control — 118 — — — — — — — — 118 871 990 Loss (gain) on sale of fixed assets (24,192) (30,418) (233,744) Transfer from other components of equity to Business and plant restructuring expenses 42,821 2,635 413,727 retained earnings — — — — — — (11,094) (6,564) (17,659) 17,659 — — — Loss on retirement of fixed assets 6,905 5,718 66,717 Other changes — — — — — — — — — — — (36) (36) Total transactions with owners, Decrease (increase) in trade and other receivables 56,908 21,875 549,832 etc. — 118 193,674 (150) — — (11,094) (6,564) (17,809) (267,398) (91,415) (6,672) (98,087) Balance at December 31, 2020 ¥126,354 ¥122,116 ¥ (38,657) ¥3,125 ¥(112,257) ¥ (9) ¥49,290 ¥ — ¥(59,851) ¥1,999,996 ¥2,149,958 ¥45,333 ¥2,195,291 Decrease (increase) in inventories 128,837 7,292 1,244,800 Increase (decrease) in trade and other payables (7,524) (40,807) (72,699) Increase (decrease) in consumption tax payables 14,340 (4,543) 138,549 Fiscal year ended December 31, 2019 Other (16,806) (4,881) (162,379) Equity attributable to owners of parent Other components of equity Subtotal 604,791 583,179 5,843,391 Net change Interest and dividends received 7,835 16,535 75,700 in fair value of Exchange Effective financial assets Remeasure- differences portion of measured ments Interest paid (13,960) (15,096) (134,880) Stock on translation change in fair through other of defined Non- Common Capital Treasury acquisition of foreign value of cash comprehen- benefit Retained controlling Income taxes paid (71,719) (79,589) (692,937) Note stock surplus stock rights operations flow hedges sive income plans Total earnings Total interests Total Millions of yen Net cash provided by (used in) operating activities 526,947 505,029 5,091,274 Balance at January 1, 2019 ¥126,354 ¥121,998 ¥ (32,648) ¥3,452 ¥ — ¥ 1,742 ¥113,620 ¥ — ¥118,815 ¥2,105,280 ¥2,439,799 ¥54,572 ¥2,494,371 Cash flows from investing activities Profit — — — — — — — — — 240,111 240,111 6,179 246,291 Payments for purchase of property, plant and equipment (200,677) (270,530) (1,938,912) Other comprehensive income — — — — (18,968) (2,066) 6,115 2,325 (12,594) — (12,594) 2,299 (10,295) Total comprehensive income — — — — (18,968) (2,066) 6,115 2,325 (12,594) 240,111 227,517 8,478 235,995 Proceeds from sale of property, plant and equipment 38,857 38,758 375,430 Payments for purchase of intangible assets (17,436) (11,256) (168,467) Purchase of treasury stock 24 — — (200,004) — — — — — — (234) (200,237) — (200,237) Disposal of treasury stock 24 — — 322 (177) — — — — (177) (144) 0 — 0 Proceeds from sale of investment securities 19,755 87,091 190,871 Dividends 25 — — — — — — — — — (117,701) (117,701) (10,028) (127,729) Payments of long-term loans receivable (4,450) (2,071) (42,992) Transfer from other components of equity Collection of loans receivable 3,489 1,210 33,709 to retained earnings — — — — — — (61,058) (2,325) (63,383) 63,383 — — — Other changes — — — — — — — — — — — 77 77 Purchase of investments in subsidiaries resulting in change in scope Total transactions with owners, of consolidation (1,873) (110,354) (18,092) etc. — — (199,682) (177) — — (61,058) (2,325) (63,560) (54,696) (317,938) (9,951) (327,889) Other 6,957 5,275 67,220 Balance at December 31, 2019 ¥126,354 ¥121,998 ¥(232,330) ¥3,275 ¥(18,968) ¥ (325) ¥ 58,678 ¥ — ¥ 42,661 ¥2,290,696 ¥2,349,378 ¥53,099 ¥2,402,477 Net cash provided by (used in) investing activities (155,378) (261,875) (1,501,234) Cash flows from financing activities Fiscal year ended December 31, 2020 Proceeds from short-term debt 32 309,432 292,943 2,989,682 Equity attributable to owners of parent Repayments of short-term debt 32 (248,436) (257,682) (2,400,344) Other components of equity Net change Proceeds from long-term debt 32 116,615 30 1,126,719 in fair value of Exchange Effective financial assets Remeasure- Repayments of long-term debt 32 (3,353) (23,361) (32,398) differences portion of measured ments Stock on translation change in fair through other of defined Non- Common Capital Treasury acquisition of foreign value of cash comprehen- benefit Retained controlling Proceeds from issuance of bonds 32 — 200,000 — Note stock surplus stock rights operations flow hedges sive income plans Total earnings Total interests Total Redemption of bonds 32 — (70,000) — Thousands of U.S. dollars Balance at January 1, 2020 $1,220,812 $1,178,724 $(2,244,736) $31,646 $ (183,267) $(3,137) $566,938 $ — $ 412,180 $22,132,325 $22,699,305 $513,037 $23,212,342 Repayments of lease liabilities 32 (57,132) (55,002) (551,997) Profit (loss) — — — — — — — — — (225,134) (225,134) 34,500 (190,634) Purchase of treasury stock (3) (200,004) (29) Other comprehensive income — — — — (901,343) 3,047 16,481 63,424 (818,391) — (818,391) (45,076) (863,467) Total comprehensive income — — — — (901,343) 3,047 16,481 63,424 (818,391) (225,134) (1,043,525) (10,576) (1,054,101) Dividends paid to owners of parent (91,524) (117,679) (884,292) Dividends paid to non-controlling interests (7,501) (9,954) (72,478) Purchase of treasury stock 24 — — (30) — — — — — — — (30) — (30) Disposal of treasury stock 24 — — 1,871,273 (1,448) — — — — (1,448) (1,869,821) 4 — 4 Other (21) 251 (203) Dividends 25 — — — — — — — — — (884,353) (884,353) (72,527) (956,881) Net cash provided by (used in) financing activities 18,077 (240,458) 174,659 Changes in ownership interests of owners in Effect of exchange rate changes on cash and cash equivalents (12,025) (1,293) (116,183) subsidiaries under control — 1,142 — — — — — — — — 1,142 8,419 9,561 Transfer from other Net increase (decrease) in cash and cash equivalents 377,621 1,403 3,648,516 components of equity to Cash and cash equivalents at beginning of period 432,924 433,916 4,182,845 retained earnings — — — — — — (107,191) (63,424) (170,615) 170,615 — — — Other changes — — — — — — — — — — — (351) (351) Cash and cash equivalents included in assets held for sale — (2,395) — Total transactions with owners, etc. — 1,142 1,871,243 (1,448) — — (107,191) (63,424) (172,063) (2,583,558) (883,236) (64,461) (947,696) Cash and cash equivalents at end of period 8 ¥ 810,546 ¥ 432,924 $ 7,831,361 Balance at December 31, 2020 $1,220,812 $1,179,867 $ (373,493) $30,198 $(1,084,610) $ (90) $476,228 $ — $(578,274) $19,323,633 $20,772,545 $438,001 $21,210,545

20 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 21 Notes to Consolidated Financial Statements

NOTE 1 REPORTING ENTITY the fair value of the consideration is directly recognized in The acquisition of additional non-controlling interests is equity as interests attributable to the shareholders of the accounted for as an equity transaction, and accordingly, it Bridgestone Corporation (the “Company”) is a stock subsidiaries (the “Group”) as well as the Company’s inter- Company. does not recognize goodwill attributable to such transactions. company located in Japan. The Company’s consolidated ests in its associates and joint ventures. If the Group loses control over a subsidiary, gains and Business combinations under common control (i.e., financial statements, which were prepared for the reporting The detail of the Group’s business is stated in Note losses derived from the loss of control are recognized in transactions in which all of the combining entities and/or period ended December 31, represent the Company and its “6. Operating Segments.” profit or loss. businesses are ultimately controlled by the same party or parties both before and after the business combination and 2) Associates the common control is not transitory) are accounted for at NOTE 2 BASIS OF PREPARATION An associate is an entity which the Group does not control, carrying amount. (1) Statement of compliance with IFRS and matters related of IFRS standards that have not been early adopted and the but exerts significant influence on financial and operating to first-time adoption exemptions permitted under IFRS 1 “First-time Adoption of policies thereof. The equity method is applied to associates (3) Foreign currency translation The consolidated financial statements of the Group have International Financial Reporting Standards” (“IFRS 1”). from the date that the Group has significant influence to the 1) Foreign currency transactions been prepared in accordance with International Financial The exemptions adopted by the Group are described in date that it loses the significant influence. Foreign currency transactions are translated into the func- Reporting Standards (“IFRS”) pursuant to the provisions of Note “39. First-time Adoption of IFRS.” tional currency of each entity of the Group by using the Article 93 of the Ordinance on Terminology, Forms, and 3) Joint ventures exchange rate at the date of the transaction or a rate that Preparation Methods of Consolidated Financial Statements (2) Basis of measurement A is an entity jointly controlled by two or more approximates such rate. (Ordinance of the Ministry of Finance No. 28, 1976), as the The consolidated financial statements of the Group have parties, including the Group under the contractually agreed At the end of each reporting period, monetary items Group satisfies the requirements for “specified company been prepared based on historical cost, except for items sharing of control over economic activities of the joint denominated in foreign currencies are translated into func- complying with designated international accounting stan- such as financial instruments that are measured at fair venture, which exists only when strategic financial and tional currencies using the exchange rate at the end of each dards” set forth in Article 1-2 of the same ordinance. value as stated in Note “3. Significant Accounting Policies.” operating decisions related to the relevant activities require reporting period. Non-monetary items at fair value denom- The consolidated financial statements were approved unanimous consent of the parties sharing control. inated in foreign currencies are translated at an exchange on May 17, 2021 by Shuichi Ishibashi, Member of the Board, (3) Functional currency and presentation currency The equity method is applied to joint ventures held by rate of the date when their fair values are measured. Global CEO and Representative Executive Officer of the The consolidated financial statements of the Group are the Group. Exchange differences arising from translation or settle- Company, and Naoki Hishinuma, Corporate Executive presented in Japanese yen, which is the functional currency ment of monetary items denominated in foreign currencies Manager, Financial Executive Manager and Global CFO of adopted by the Company, and figures less than one million (2) Business combinations are recognized in profit or loss. However, those translation the Company. yen are rounded off to the nearest million yen. Business combinations are accounted for by the acquisition differences arising from financial assets measured through The Group adopted IFRS for the first time in the fiscal The translations of Japanese yen amounts into U.S. method. Consideration for acquisition is measured as the other comprehensive income as well as from cash flow year ended December 31, 2020, and the date of transition to dollar amounts are included solely for the convenience sum of the acquisition-date fair values of the assets trans- hedges are recognized in other comprehensive income. IFRS (the “transition date”) is January 1, 2019. Effects of the of readers outside Japan and have been made at the rate ferred, liabilities assumed, and equity instruments issued transition to IFRS on the Group’s consolidated financial posi- of ¥103.50 to $1, the approximate rate of exchange on by the Company in exchange of control over the acquired 2) Financial statements of foreign operations tion, financial results and cash flows on the transition date December 31, 2020. Such translations should not be company. If consideration for acquisition exceeds the fair Assets and liabilities of foreign operations, including any and in the comparative year are stated in Note “39. First- construed as representations that the Japanese yen value of identifiable assets and liabilities, such excess is goodwill arising on the acquisition of a foreign operation time Adoption of IFRS.” amounts could be converted into U.S. dollars at that or any recorded as goodwill in the consolidated statement of and any fair value adjustments, are translated into presen- The Group’s accounting policies are in compliance with other rate. financial position. Conversely, if the consideration turns out tation currency using the exchange rate at the end of the IFRS effective as of December 31, 2020, with the exception to be less than the fair value, the difference is immediately reporting period. Additionally, income and expenses of recognized in profit or loss in the consolidated statement foreign operations are translated into presentation of profit or loss. Acquisition costs that are attributable to currency using average exchange rates during the period, NOTE 3 SIGNIFICANT ACCOUNTING POLICIES a business combination are expensed as incurred. except where the exchange rates fluctuate significantly. (1) Basis of consolidation internal transactions within the Group, are eliminated when If the initial accounting for a business combination is Exchange differences arising from translation of the 1) Subsidiaries preparing the consolidated financial statements. incomplete by the end of the fiscal year in which the busi- financial statements of foreign operations are recognized in A subsidiary is an entity under the control of the Group. The Comprehensive income of subsidiaries is attributed to ness combination occurs, the Group reports provisional other comprehensive income. For disposals of entire inter- Group controls an entity when it is exposed to or has rights owners of parent and non-controlling interests, even if this amounts for the items for which the accounting is incom- ests in foreign operations and partial disposals of interests to variable returns arising from its involvement in the entity results in a negative balance in non-controlling interests. plete. The provisional values recognized at the acquisition resulting in loss of control or loss of significant influence, and has an ability to affect those returns through its power When the closing date of a subsidiary is different from date are retrospectively adjusted to reflect new informa- translation differences are recognized in profit or loss as over the entity. that of the Group, the subsidiary implements its financial tion obtained during a certain designated period (the part of the gain or loss on disposal. The financial statements of subsidiaries are included in statements based on the provisional accounting as of the “measurement period”) on facts and circumstances that the consolidated financial statements from the date the Group’s closing date. The main subsidiary with a different existed at the acquisition date and, if known at the acquisi- (4) Financial instruments Group gains control until the date that control is lost. If any closing date is BRIDGESTONE INDIA PRIVATE LTD., which tion date, would have affected the measurement of the 1) Financial assets other than derivatives accounting policies applied by a subsidiary differ from those adopts a closing date of March 31 due to the local legal amounts recognized. Additional assets or liabilities are (i) Initial recognition and measurement of the Group, adjustments are made to the subsidiary’s system where it operates. recognized if this new information is known to have Trade and other receivables are initially recognized on the financial statements where needed to bring them in line Changes in the Group’s ownership interest in subsidiaries resulted in the additional recognition of assets or liabilities. date when they are incurred. All other financial assets are with the Group’s accounting policies. The balances of that do not result in a loss of control are accounted for as The measurement period may not exceed one year. initially recognized on the date when the Group becomes a payables and receivables and transactions within the equity transactions, and the difference between the party to the contract on such financial instruments. Group, as well as unrealized gains or losses arising from amount by which non-controlling interests are adjusted and

22 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 23 Notes to Consolidated Financial Statements

At initial recognition, financial assets other than deriva- from such financial assets are recognized in profit or loss as Financial liabilities other than derivatives are classified (ii) Cash flow hedges tives, which meet both of the following requirements, are finance income in the period when the Group’s right to into either financial liabilities measured at amortized cost For the portion of the gain or loss on the hedging instru- classified as financial assets measured at amortized cost, receive payment of the dividends is established. or financial liabilities measured at fair value through profit ment that is determined to be an effective hedge, changes while the rests are classified as financial assets measured at or loss at initial recognition. in fair value are recognized in other comprehensive income. fair value. (iii) Derecognition All the financial liabilities are initially measured at fair When cash flows of the hedged item affect profit or loss, • The assets are held based on the business model whose Financial assets are derecognized when the right to receive value, while financial liabilities measured at amortized cost they, together with the hedged item, are immediately objective is to hold the assets in order to collect contrac- benefits expires or all the risk and rewards of ownership of are measured at fair value less directly attributable transac- recognized in profit or loss. tual cash flows. the financial assets are transferred to other entities. tion costs. For the ineffective portion of hedge, the changes in fair • The contractual terms of the financial asset give rise on value are recognized in profit or loss. specified dates to cash flows that are solely payments of 2) Impairment of financial assets measured at amortized cost (ii) Subsequent measurement The Group discontinues hedging accounting when the principal and interest on the principal amount To account for impairment of items such as financial assets Financial liabilities after the initial recognition are as hedging instrument is expired, sold, terminated, or exer- outstanding. measured at amortized cost, the Group recognizes an follows, depending on respective classifications: cised, when the hedge no longer qualifies for hedge Financial assets measured at fair value are classified into allowance for doubtful accounts against expected credit (a) Financial liabilities measured at amortized cost accounting, or when the hedge designation is revoked. either financial assets whose changes in fair values after losses on such financial assets. After initial recognition, financial liabilities measured at acquisition are recognized in profit or loss (“financial assets At each reporting date, financial assets are assessed amortized cost are measured at amortized cost by using (iii) Derivatives not designated as hedging instruments measured at fair value through profit or loss”) and financial whether there has been a significant increase in credit risk the effective interest method. Fair value changes on derivatives are recognized in profit or loss. assets whose changes in fair values after acquisition are on financial instruments since initial recognition. (b) Financial liabilities measured at fair value through profit recognized in other comprehensive income (“financial If credit risk on a financial instrument has not increased or loss 5) Offsetting financial instruments assets measured at fair value through other comprehensive significantly since initial recognition, the allowance for After initial recognition, financial liabilities measured at A financial asset and a financial liability are offset and the net income”). doubtful accounts associated with the relevant financial fair value through profit or loss are remeasured at fair value amount presented only when the Group currently has a At initial recognition, equity instruments that are not instrument is measured at an amount equal to 12-month as of each closing date with any changes in fair values being legally enforceable right to set off the recognized amounts; designated as financial assets measured at fair value expected credit losses. On the other hand, if credit risk on a recognized in profit or loss. and intends either to settle on a net basis or to realize the through other comprehensive income and debt instruments financial instrument has increased significantly since initial asset and settle the liability simultaneously. that do not meet the requirements for the amortized cost recognition, the allowance for doubtful accounts associated (iii) Derecognition measurement are classified as financial assets measured at with the relevant financial instrument is measured at an Financial liabilities are derecognized when the obligation is (5) Fair value measurement fair value through profit or loss. amount equal to lifetime expected credit losses. discharged, canceled or expired. Certain assets and liabilities are recognized at fair value. Equity instruments that are not held for trading are, in However, the allowance for doubtful accounts for trade The fair value of such assets and liabilities is determined principle, designated as financial assets measured at fair receivables and the like are always measured at an amount 4) Derivatives and hedge accounting based on market information, such as quoted market price value through other comprehensive income at initial recog- equal to lifetime expected credit losses. The Group uses derivatives, including forward exchange or valuation techniques including the market approach, the nition. Expected credit losses of financial instruments are esti- contracts and interest rate swap transactions, for the purpose income approach and the cost approach. The inputs used in All the financial assets, except for those classified as mated in a way that reflect the following items: of hedging foreign currency risk and interest rate risk. the fair value measurement are categorized into the financial assets measured at fair value through profit or • Unbiased and probability-weighted amount that is deter- At the inception of the hedge, the Group designates and following three levels. loss, are measured at fair value plus transaction costs mined by evaluating a range of possible outcomes; documents the hedging relationship between a hedging Level 1: Fair value that is measured by using quoted prices directly attributable to the acquisition of the assets. • Time value of money instrument and a hedged item as well as the Group’s risk in active markets • Reasonable and supportable information that is available management objective and strategy concerning the hedge. Level 2: Fair value, other than Level 1, that is determined by (ii) Subsequent measurement without undue cost or effort at the reporting date about That documentation includes the hedging relationship, the directly or indirectly using the observable price Financial assets after the initial recognition are as follows, past events, current conditions and forecasts of future risk management objective and strategy for undertaking the Level 3: Fair value determined by using valuation tech- depending on respective classifications: economic conditions. hedge, as well as the assessment of the hedge effectiveness. niques that incorporate unobservable inputs (a) Financial assets measured at amortized cost The amounts of these measurements are recognized in These hedges are expected to be highly effective in After initial recognition, financial assets measured at amor- profit or loss. If an event occurs after recognition of an offsetting changes in the fair value or the cash flows; (6) Cash and cash equivalents tized cost are measured at amortized cost by using the impairment loss that results in a decrease of the impair- however, the Group assesses, on an ongoing basis, whether Cash and cash equivalents consist of cash on hand, demand effective interest method. ment loss, such decrease is reversed in profit or loss. they actually remained highly effective throughout the deposits, and short-term investments with maturities not (b) Financial assets measured at fair value through profit or loss The carrying amount of these financial assets is directly hedge period. exceeding three months from the acquisition date, that are After initial recognition, financial assets measured at fair reduced for the impairment when they are expected to Derivatives are initially recognized at fair value. After readily convertible into cash and subject to an insignificant value through profit or loss are remeasured at fair value as become non-recoverable in the future, offsetting the initial recognition, derivatives are measured at fair value risk of changes in value. of each closing date, and changes in fair values and divi- carrying amount by the allowance for doubtful accounts. and the subsequent changes in fair value are accounted for dends are recognized in profit or loss. as follows: (7) Inventories (c) Financial assets measured at fair value through other 3) Financial liabilities other than derivatives Inventories are measured at the lower of cost and net real- comprehensive income (i) Initial recognition and measurement (i) Fair value hedges izable value. The cost of inventories includes costs of Changes in fair values measured after initial recognition are Debt securities issued by the Group are initially recognized Fair value changes on derivatives are recognized in profit or loss. purchase, costs of conversion and other costs incurred in recognized in other comprehensive income. Such amounts at the date of issuance. All other financial liabilities are Fair value changes on hedged items attributable to bringing the inventories to their present location and condi- are reclassified into retained earnings in case of derecogni- recognized on the date when the Group becomes a party to hedged risks are recognized in profit or loss with the tion. The cost of inventories is calculated by primarily using tion or a significant decline in the fair values. Dividends the contract on such financial instruments. carrying amounts of the hedged items being adjusted. the moving-average method. Net realizable value is

24 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 25 Notes to Consolidated Financial Statements

determined at the estimated selling price in the ordinary incurred during the period, except for development costs • increasing the carrying amount to reflect interest on the use is classified as a non-current asset or disposal group course of business less estimated costs of completion and eligible for capitalization. lease liability; held for sale if it is highly probable that the asset or asset the estimated costs necessary to make the sale. Intangible assets with finite useful lives are amortized by • reducing the carrying amount to reflect the lease group will be sold within one year from the end of the using the straight-line method over their respective esti- payments made; and reporting period; the asset or asset group is available for (8) Property, plant and equipment mated useful lives. If there is an indication of impairment, • remeasuring the carrying amount to reflect changes to the immediate sale in its present condition; and the manage- Property, plant and equipment are measured by using cost they are tested for impairment. The estimated useful life of lease payments or a lease modification, or to reflect ment of the Group is committed to such sale. A non-current model, and stated at cost less any accumulated deprecia- each main asset item is as follows. revised in-substance fixed lease payments. asset held for sale is not depreciated or amortized and tion and any accumulated impairment losses. The cost of an Software: 1 to 10 years measured at the lower of its carrying amount and fair value item of property, plant and equipment includes any costs Trademarks: 1 to 10 years 2) Lessor less costs to sell. directly associated with its acquisition, and the costs of The amortization method for intangible assets with Rental income is recognized on a straight-line basis over dismantling and removing the item and restoring the site finite useful lives is reviewed at the end of each reporting the lease term. Rental income arising from subleased prop- (13) Employee benefits on which it is located, as well as the borrowing costs period, and any change thereof is accounted for as a change erties is recognized in other income. 1) Short-term employee benefits eligible for capitalization. in accounting estimate. The undiscounted amount of short-term employee benefits The depreciation of property, plant and equipment other Intangible assets with indefinite useful lives are not (11) Impairment of non-financial assets is recognized as an expense in the period in which the than land and construction in progress is calculated using amortized but subject to impairment test, and stated at The Group assesses, for each fiscal year, whether there is employees render related services. The bonuses and paid the straight-line method over the following estimated cost less any accumulated impairment losses. Intangible any indication that an asset may be impaired. If any such absences are recognized as a liability and an expense when useful lives. The estimated useful life of each main asset assets are tested for impairment individually or at cash- indication exists (or if the impairment test is required each the Group has a present legal or constructive obligation to item is as follows. generating unit level annually or whenever there is any year), the Group estimates the recoverable amount of the pay the benefits in return for the past services rendered by Buildings and structures: 10 to 50 years indication of impairment. asset. If it is not possible to estimate the recoverable employees, and the Group can make a reliable estimate of Machinery and vehicles: 3 to 17 years amount of an individual asset, the Group estimates the the amount. Tools, furniture and fixtures: 2 to 20 years (10) Leases recoverable amount of the cash-generating unit to which The depreciation method for property, plant and equip- 1) Lessee the asset belongs. The recoverable amount of an asset or a 2) Post-employment benefits ment is reviewed at the end of each reporting period, and At inception of a contract, the Group recognizes a right-of- cash-generating unit is measured at the higher of its fair The Group has adopted a defined benefit plan (such as a any change thereof is accounted for as a change in use asset and a lease liability for lease components other value less costs to sell and its value in use. When the corporate pension plan and a lump-sum retirement benefit accounting estimate. than short-term leases and leases for which the underlying carrying amount of the asset or the cash-generating unit plan) and a defined contribution plan as the post-employ- asset is of low value. At the commencement date, the Group exceeds the recoverable amount, the Group recognizes an ment benefit plans for its employees. (9) Goodwill and intangible assets measures the right-of-use asset at cost and the lease liability impairment loss for the asset and reduces the carrying The Group determines the present value of defined 1) Goodwill at the present value of the lease payments that are not paid amount of the asset to its recoverable amount. In calcu- benefit obligation as well as the related current service cost The Group recognizes goodwill arising from business at that date. lating the asset’s value in use, the estimated future cash and past service cost by using the projected unit credit combinations as an asset as of the date when control is The lease term is determined as the non-cancellable flows are discounted to the present value by using a pre-tax method. The discount rate is determined by first setting the obtained (the acquisition date). The measurement of good- period of a lease, together with both: periods covered by an discount rate that reflects current market assessments of discount period based on the periods until the dates on will at initial recognition is presented in “(2) Business option to extend the lease (if the Group is reasonably the time value of money and other factors such as the risks which the benefits for each fiscal year will be paid, and then combinations.” certain to exercise that option); and periods covered by an specific to the asset. The fair value less costs to sell is calcu- by referencing to market yields on high quality corporate Goodwill is stated at cost less accumulated impairment option to terminate the lease (if the Group is reasonably lated by using an appropriate valuation model supported by bonds and the like at the end of the reporting period corre- losses. The Group does not amortize goodwill, but tests for certain not to exercise that option). indications of fair value available to the Group. sponding the discount period. The defined benefit plan impairment annually or whenever there is any indication of After the commencement date, the right-of-use asset is The Group assesses whether there is any indication that liability or asset is determined by subtracting the fair value impairment. For the purpose of impairment test, goodwill measured at cost less any accumulated depreciation and an impairment loss recognized in prior years for asset other of the plan assets from the present value of the defined obtained in business combinations is allocated to a cash- any accumulated impairment losses. The Group applies the than goodwill may have decreased or may no longer exist benefit obligation. Remeasurements of defined benefit generating unit or groups of cash-generating units that are depreciation requirements in International Accounting due to a change in assumptions used to determine the plans are recognized in a lump sum in other comprehensive expected to benefit from the synergies of the combination Standards (IAS) 16 “Property, Plant and Equipment” in recoverable amount or other reasons. If any such indication income when they arise, and reclassified to retained earn- on and after the acquisition date. depreciating the right-of-use asset. The Group also applies exists, the Group estimates the recoverable amount of the ings immediately. Past service cost is recognized in profit or Impairment losses of goodwill are recognized in profit or IAS 36 “Impairment of Assets” to determine whether the asset or the cash-generating unit. Then if such recoverable loss for the period in which it is incurred. loss and not reversed subsequently. right-of-use asset is impaired and to account for any impair- amount exceeds the carrying amount of the asset or the The Group accounts for the defined contribution plan by ment loss identified. cash-generating unit, the Group reverses an impairment recognizing an expense when the Group makes contribu- 2) Intangible assets If the lease transfers ownership of the underlying asset loss to the extent not exceeding the lower of the estimated tion to the plan. The Group measures intangible assets using the cost model to the Group by the end of the lease term, the Group depre- recoverable amount and the carrying amount that would Certain consolidated subsidiaries primarily in the United and stated at cost less any accumulated amortization and ciates the right-of-use asset from the commencement date have been determined (net of amortization or depreciation) States have adopted a defined benefit retirement plan and any accumulated impairment losses. to the end of the useful life of the underlying asset. Other- had no impairment loss been recognized for the asset in a post-employment medical benefit plan to prepare for the Separately acquired intangible assets are initially wise, the Group depreciates the right-of-use asset from the prior years. retirement benefits to the employees. A post-employment measured at cost, while the cost of intangible assets commencement date to the earlier of the end of the useful medical benefit plan in the United States is included in the acquired in a business combination is measured at fair value life of the right-of-use asset or the end of the lease term. (12) Non-current assets held for sale net defined benefit liability due to the nature similar to the as of the acquisition date. Expenditures for internally After the commencement date, the Group measures the An asset or asset group that is expected to be recovered retirement benefits. generated intangible assets are recognized as an expense lease liability by: through a sale transaction rather than through continuing

26 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 27 Notes to Consolidated Financial Statements

(14) Share-based payment records an amount that is currently expected to be incurred items recognized in other comprehensive income or directly amount if the tax position has a high probability of being The Group has adopted the stock option plan as an equity- in the future to prepare for the related expenditures. in equity, and tax arising from business combinations. accepted based on a tax law interpretation. settled share-based payment plan as well as the Current taxes are measured at an expected amount of Deferred tax assets and liabilities are offset against each Performance Share Unit (PSU) plan as a cash-settled share- (16) Revenue taxes to be paid to or of refund from the taxation authori- other if the Group has a legally enforceable right to offset based payment plan. Stock options are estimated at fair The Group recognizes revenue at an amount reflecting the ties. The amount of tax is calculated based on the tax rates current tax assets against current tax liabilities and when either value at the date of grant, taking into account the esti- amount of consideration to which the Group expects to be and the tax laws that have been enacted, or substantially of the following are met: income taxes are levied by the same mated number of options to be vested, and recognized as entitled in exchange for transferring the goods and services enacted by the reporting date. taxation authority on the same taxable entity; or income taxes expenses over the vesting periods in the consolidated to the customer based on the following five-step approach, Deferred taxes are recognized for the temporary differ- are levied by the same taxation authority on different taxable statement of profit or loss while corresponding increases to except for interest and dividend income, etc. received ences between the carrying amount of assets and liabilities entities, but they either have the intention to settle current equity are recognized in the consolidated statement of under IFRS 9 “Financial Instruments” (“IFRS 9”): for accounting purposes and their tax bases, unused tax tax liabilities and current tax assets on a net basis or plan to financial position. Fair value of stock options granted is Step 1: Identify contract(s) with a customer losses carryforward and unused tax credits carryforward as realize assets and settle liabilities simultaneously. calculated, in accordance with various terms of such Step 2: Identify the performance obligations in the contract of the reporting date. options, using the Black-Scholes model. Step 3: Determine the transaction price Deferred tax assets and liabilities are not recognized for (20) Treasury stock For the PSU plan, the Group recognizes awards as an Step 4: Allocate the transaction price to performance obli- following temporary differences: Treasury stock is measured at cost and presented as a expense over the vesting period, recording the same gations in the contract • Temporary differences arising from the initial recognition deduction from equity. No gain or loss is recognized on the amount as an increase in a liability. As of the reporting date Step 5: Recognize revenue when (or as) the performance of goodwill purchase, sale or retirement of treasury stock. The differ- and the settlement date, the Group remeasures the fair obligation is satisfied. • Temporary differences arising from initial recognition of ence between the carrying amount and the consideration value of the liability and recognizes any changes in fair assets and liabilities from transactions that are not busi- thereof at the time of sale is recognized as equity. value in profit or loss. Revenues from sale of goods are recognized when the ness combinations and affect neither accounting profit or control over the goods is transferred to the customer and taxable income (loss) (21) Dividends (15) Provisions measured at an amount of consideration promised in a • Deductible temporary differences arising from investments Of the dividend distributions to the shareholders of the The Group recognizes provisions when it has a present obli- contract with a customer less estimated future returns, in subsidiaries and associates, and interests in joint Company, the year-end dividend is recognized as a liability gation (legal or constructive) as a result of a past event; discounts and rebates. The amount of returns is estimated arrangements when it is probable that the temporary for the period that includes the date of resolution by the when it is probable that an outflow of resources embodying and calculated based on an expected return rate derived difference will not reverse in the foreseeable future or Company’s shareholders’ meeting, while the interim divi- economic benefits will be required to settle the obligation; from the past data and the like. As for discounts and when it is not probable that taxable profit will be available dend is recognized as a liability for the period that includes and when a reliable estimate can be made of the amount of rebates, the amount of future payments is estimated and against which the temporary difference can be utilized. the date of resolution by the Board of Directors. the obligation. calculated based on contracts and the like until actual • Taxable temporary differences arising from investments in Where the effect of the time value of money is material, results are confirmed. subsidiaries and associates, and interests in joint arrange- (22) Earnings per share the amount of a provision is measured at the present value ment when the Group is able to control the timing of the Basic earnings per share are calculated by dividing profit or of the expenditures expected to be required to settle the (17) Government grants reversal of the temporary difference and it is probable loss attributable to owners of parent by the weighted- obligation. The present value of the expenditures is calcu- Government grants are recognized at fair value when that the temporary difference will not reverse in the fore- average number of shares of ordinary shares outstanding lated by using a pre-tax discount rate that reflects current conditions for the receipt of grants have been met and seeable future. adjusted by the number of shares of treasury stock during market assessments of the time value of money and the reasonable assurance for the receipt could be obtained. A deferred tax liability is recognized for all taxable the period. Diluted earnings per share are calculated taking risks specific to the liability with uncertainty of the occur- When government grants are related to the items of temporary differences in principle, and a deferred tax asset into consideration the effect of all potential shares with rence of obligating events being reflected in the estimated expense, government grants are recognized in profit or loss is recognized for all deductible temporary differences to dilutive effect. future cash flows. on a systematic basis over the periods in which the Group the extent that it is probable that taxable income will be Provisions that the Group recognizes are mainly recognizes as expenses the related costs for which the available against which deductible temporary differences (23) Adjusted operating profit as follows: grant is intended to compensate. For grants related to can be utilized. Adjusted operating profit is determined by adding or 1) Provision for compensation for industrial accidents assets, the amount of the grant is deducted from the cost of Carrying amount of deferred tax assets is reviewed each subtracting certain adjustment items to or from pre- The Group estimates and records an amount based on the the asset. period and reduced to the extent that it is no longer prob- adjusted metrics. past and current experience to prepare for the payment of able that sufficient taxable income will be available to use Reconciliations: Business and plant restructuring income the medical expenses, the absence from work compensa- (18) Borrowing costs all or part of the benefit of the deferred tax assets. Unrec- and expenses, impairment losses, loss on disaster, insur- tion, etc. incurred as a result of industrial accidents. Borrowing costs directly attributable to the acquisition, ognized deferred tax assets are reviewed each period and ance claim income, and other gains and losses with large construction, or production of a qualifying asset are capital- are recognized to the extent that it has become probable amounts related to one time event 2) Provision for loss on litigation ized and form part of the cost of the asset. A qualifying that future taxable income will allow the deferred tax The management of the Group determines the adjust- To prepare for the expenditures of litigation-related asset is an asset that necessarily takes a substantial period assets to be recovered. ment items based on whether they can help provide expenses, the Group estimates and records an amount of of time to get ready for its intended use or sale. Other Deferred tax assets and liabilities are measured at the effective comparative information on the Group perfor- compensation for damages, settlement package, etc. that borrowing costs are recognized as expenses in the period tax rates and by the tax laws that are expected to apply to mance and appropriately reflect how the businesses are is currently expected to be incurred in the future. in which they are incurred. the period when the assets are realized or the liabilities are managed. The adjusted operating profit is presented in settled, based on the tax rates and tax laws enacted or Note “6. Operating Segments.” 3) Provision for business and plant restructuring expenses (19) Income taxes substantively enacted at the end of the reporting period. Adjusted operating profit is not defined by IFRS and not Primarily due to the commencement of discussions for the Income taxes consist of current tax and deferred tax. These For uncertain income tax positions, the Group recog- necessarily comparable to metrics similarly named by other closure of overseas tire plants, the Group estimates and are recognized in profit or loss, excluding tax arising from the nizes an asset or a liability at a reasonably estimated companies.

28 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 29 Notes to Consolidated Financial Statements

NOTE 4 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS INVOLVING ESTIMATES Fiscal year ended December 31, 2020

In preparing consolidated financial statements in accor- The assumptions and estimates that have a significant Reportable segments dance with IFRS, the Group is required to establish Europe, Russia, risk of causing a material adjustment in the future are Middle East, China, Others Corporate or Consoli- judgments, estimates and assumptions that affect the mainly as follows: Japan Americas India and Africa Asia-Pacific Total (Note 1) elimination dated total application of accounting policies and the reported amount Impairment for non-financial assets (property, plant and Millions of yen Revenue of assets, liabilities, revenues and expenses. Actual results equipment; right-of-use assets; intangible assets; goodwill; External revenue ¥608,103 ¥1,402,147 ¥556,843 ¥345,664 ¥2,912,757 ¥ 81,735 ¥ 32 ¥2,994,524 may differ from those estimates. and investments accounted for using the equity method) Inter-segment revenue 154,531 5,797 7,505 48,946 216,779 39,359 (256,138) — The estimates and their underlying assumptions are and recoverability of deferred tax assets are estimated Total revenue 762,635 1,407,943 564,348 394,610 3,129,536 121,094 (256,106) 2,994,524 reviewed on an ongoing basis. The effect of any changes in and assessed including the impacts of COVID-19. Given the Segment profit (loss) accounting estimates is recognized in the reporting period progress of the recovery in demand and changes in the Adjusted operating profit in which the change was made and in future periods. environment of each region, the Group separately esti- (loss) ¥ 64,621 ¥ 139,862 ¥ (17,557) ¥ 24,595 ¥ 211,520 ¥ 1,381 ¥ 10,030 ¥ 222,932 The items involving estimates and judgments that signif- mates the impact of COVID-19, assuming that it will have a Other items Depreciation and icantly affect the amounts in the consolidated financial direct impact on the Group’s performance until the period amortization ¥ 56,465 ¥ 92,608 ¥ 49,289 ¥ 44,367 ¥ 242,729 ¥ 11,383 ¥ 13,343 ¥ 267,454 statements are listed as follows: ending December 31, 2022 at the longest. Please refer to Impairment losses 17,329 710 21,406 50,161 89,605 16 — 89,622 • Impairment of non-financial assets (Note “16. Impairment the consolidated financial statements for the balances of Impairment loss related to shares using equity of non-financial assets”) property, plant and equipment; right-of-use assets; intan- method — 17,501 694 — 18,196 — — 18,196 • Recoverability of deferred tax assets (Note “18. Income gible assets; goodwill; investments accounted for using the (Note 1) “Others” includes the sporting goods business and the bicycles business that the Company operates. Taxes”) equity method; and deferred tax assets at the end of the • Provisions (Note “21. Provisions”) fiscal year ended December 31, 2020. As for impairment of Fiscal year ended December 31, 2019 • Measurements of defined benefit obligations (Note “23. non-financial assets and the recoverability of deferred tax Employee Benefits”) assets, please refer to Note “16. Impairment of non-financial Reportable segments Europe, Russia, • Fair value measurement of financial instruments (Note assets” and Note “18. Income Taxes”, respectively. Middle East, China, Others Corporate or Consoli- Japan Americas India and Africa Asia-Pacific Total (Note 1) elimination dated total “34. Financial Instruments”) Millions of yen Revenue External revenue ¥718,485 ¥1,652,845 ¥630,625 ¥402,711 ¥3,404,667 ¥102,536 ¥ 41 ¥3,507,243 NOTE 5 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED Inter-segment revenue 199,629 8,835 9,494 60,079 278,037 70,505 (348,542) — While there are newly issued or revised standards and not yet been early adopted by the Group, none of them Total revenue 918,114 1,661,680 640,119 462,790 3,682,703 173,041 (348,501) 3,507,243 interpretations that were issued on or before the date of have material impact on the Group’s consolidated financial Segment profit (loss) approval of the consolidated financial statements but have statements. Adjusted operating profit ¥ 108,810 ¥ 184,264 ¥ 15,034 ¥ 36,232 ¥ 344,340 ¥ 3,792 ¥ (5,010) ¥ 343,122 Other items Depreciation and amortization ¥ 55,648 ¥ 94,535 ¥ 38,717 ¥ 54,437 ¥ 243,337 ¥ 13,168 ¥ 13,244 ¥ 269,749 Impairment losses 7,050 221 — 764 8,035 2,508 — 10,542 NOTE 6 OPERATING SEGMENTS (Note 1) “Others” includes the sporting goods business and the bicycles business that the Company operates. (1) Description of reportable segments engages in production and sale of tires and tubes, sale of The Group’s reportable segments are components of the wheels and accessories, production and sale of retread Fiscal year ended December 31, 2020 Group for which separate financial information is available, material and services, auto maintenance and repair and which are subject to regular review by the Board of services, and Diversified products business including Chem- Reportable segments Europe, Russia, Directors for the purpose of making decisions about the ical and Industrial Products and BSAM Diversified Products. Middle East, China, Others Corporate or Consoli- (Note 1) elimination dated total allocation of management resource and assessing the Japan Americas India and Africa Asia-Pacific Total Thousands of U.S. dollars segments’ performance. (2) Revenues and Performances of Reportable Segment Revenue From the first quarter ended March 31, 2020, the Group Revenue and business results of the continuing operations External revenue $5,875,396 $13,547,309 $5,380,128 $3,339,747 $28,142,581 $ 789,714 $ 305 $28,932,599 has consolidated the reportable segments, which were by reportable segment of the Group are detailed in the Inter-segment revenue 1,493,057 56,008 72,508 472,907 2,094,479 380,281 (2,474,760) — previously divided into two “business segments” and four table below. The Board of Directors assesses the segment Total revenue 7,368,452 13,603,317 5,452,636 3,812,655 30,237,060 1,169,995 (2,474,456) 28,932,599 “geographical segments,” into the following four segments: performance and determines resource allocation after Segment profit (loss) “Japan,” “Americas,” “Europe, Russia, Middle East, India and reviewing revenues and adjusted operating profit. Internal Adjusted operating profit Africa,” and “China, Asia-Pacific.” The consolidation of the sales or transfers between segments are determined (loss) $ 624,353 $ 1,351,324 $ (169,635) $ 237,634 $ 2,043,676 $ 13,345 $ 96,912 $ 2,153,933 reportable segments has been made for the purpose of primarily at selling prices based on arm’s length transaction Other items Depreciation and disclosing business results more appropriately based on the prices or total cost. Also, figures for the previous fiscal year amortization $ 545,555 $ 894,765 $ 476,218 $ 428,670 $ 2,345,209 $ 109,978 $ 128,914 $ 2,584,101 SBU (Strategic Business Units) —the classification of the have been reclassified in accordance with the new segment Impairment losses 167,428 6,862 206,818 484,645 865,753 157 — 865,910 Group’s businesses for management control purposes. In structure described in (1). Impairment loss related to shares using the equity the aforementioned new segment structure, the Group method — 69,096 6,708 — 175,803 — — 175,803

(Note 1) “Others” includes the sporting goods business and the bicycles business that the Company operates.

30 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 31 Notes to Consolidated Financial Statements

Reconciliation from adjusted operating profit to profit before tax Non-current assets

Fiscal year ended Fiscal year ended Fiscal year ended As of December 31, 2020 December 31, 2019 December 31, 2020 As of As of January 1, 2019 As of

Millions of yen Thousands of U.S. dollars December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Adjusted operating profit (Note 2) ¥222,932 ¥343,122 $2,153,933 Millions of yen Thousands of U.S. dollars Adjusted items (income) (Note 3) 467 27,396 4,515 Japan ¥ 526,026 ¥ 538,829 ¥ 540,397 $ 5,082,378 Adjusted items (expenses) (Note 5) 159,285 21,181 1,538,988 Americas 749,935 805,822 794,794 7,245,745 Europe, Russia, Middle East, India and Africa Operating profit 64,114 349,336 619,460 394,585 364,901 231,256 3,812,415 China, Asia-Pacific Finance income 8,431 17,748 81,457 255,687 389,299 390,561 2,470,403 Total ¥1,926,232 ¥2,098,850 ¥1,957,008 $18,610,941 Finance costs 23,654 28,324 228,542 Impairment loss related to shares using equity method 18,196 — 175,803 (Note) Non-current assets are broken down by location of each asset and do not include financial instruments, deferred tax assets and assets associated with employee benefits. Share of profit (loss) of investments accounted for using the equity method (1,429) (3,251) (13,809) Profit before tax ¥ 29,266 ¥335,510 $ 282,764 (4) Information about major customers (Note 2) For adjusted operating profit, adjusted items (i.e., income and expenses) are excluded from operating profit. (Note 3) The major breakdown of adjusted items (i.e., income) are as follows: Disclosures are omitted because there are no external customers for which sales account for 10% or more of revenue in the consolidated statement of profit or loss. Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars Insurance claim income ¥305 ¥ 130 $2,946 NOTE 7 Business and plant restructuring income 162 14 1,569 BUSINESS COMBINATIONS Other gain with large amounts related to one time event — (Note 4) 27,252 — Fiscal year ended December 31, 2019 Adjusted items (income) ¥467 ¥27,396 $4,515 (1) Overview of business combinations (Note 4) Gains on the sale of land are recorded in here. (Note 5) The major breakdown of adjusted items (i.e., expenses) are as follows: 1) Name and business of the acquiree Name of the acquiree TOMTOM TELEMATICS B.V. (the company name was changed to WEBFLEET SOLUTIONS B.V. on Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 October 1, 2019) Millions of yen Thousands of U.S. dollars Description of business Digital fleet solutions business Impairment losses (Note 6) ¥ 89,622 ¥10,542 $ 865,910 Cost of sales (i.e., loss on disaster) (Note 7) 11,685 — 112,902 2) Acquisition date Other expenses (i.e., loss on disaster) (Note 8) 3,747 584 36,207 April 1, 2019 Business and plant restructuring expenses (Note 10) 42,821 (Note 9) 2,635 413,727 Other expense with large amounts related to one time event (Note 11) 11,410 7,420 110,242 3) Percentage of voting equity interests acquired Adjusted items (expenses) ¥159,285 ¥ 21,181 $1,538,988 100% (Note 6) The major breakdown of impairment losses is presented in Note “16. Impairment of non-financial assets.” (Note 7) This was primarily the recording of fixed costs, etc. arising from the period when operations were temporarily suspended at plants, etc. due to official requests and declarations by the national and local governments to prevent the spread of COVID-19. 4) Primary reasons for the business combination (Note 8) This was primarily the recording of fixed costs, incurred over the period of the suspended operations of retail stores, etc., and expenses, etc., which were the The acquired digital fleet solution business offers a leading data platform in the transportation and personal mobility indus- direct result of the preparation for and cancellation of events that were canceled due to official requests and declarations by the national and local governments to prevent the spread of COVID-19. tries, which enables safer driving and improves efficiency and productivity for personal and commercial mobility through (Note 9) This was primarily the recording of expenses relating to the sale of an overseas raw materials plant. controlling and providing various driving data. Going forward, combining this digital fleet solutions business with the Compa- (Note 10) This was primarily the recording of expenses, such as provisions relating to the commencement of discussions for the closure of overseas tire plants and expenses for the transfer of the unit bath business. ny’s tire expertise and global service network accelerates its effort to expand solution business. (Note 11) This was the recording of expenses relating to inspections, repairs, etc. of the affected standard and power assist bicycles following the recall of certain models of standard and power assist bicycles manufactured by Bridgestone Cycle Corporation, a Bridgestone consolidated subsidiary. 5) Acquisition method Acquisition of shares through cash consideration (3) Information about geographical areas The breakdown of revenue from external customers and non-current assets by geographical area is as follows: Revenue from external customers

Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars Japan ¥ 564,864 ¥ 649,294 $ 5,457,624 Americas 1,386,353 1,657,251 13,394,717 (Of which, the U.S.) (1,137,636) (1,353,971) (10,991,654) Europe, Russia, Middle East, India and Africa 631,602 710,177 6,102,432 China, Asia-Pacific 411,705 490,521 3,977,827 Total ¥ 2,994,524 ¥ 3,507,243 $ 28,932,599

(Note) Revenues are broken down by location of sales destination.

32 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 33 Notes to Consolidated Financial Statements

(2) Fair values of the total consideration transferred, assets acquired, and liabilities assumed as of acquisition date NOTE 8 CASH AND CASH EQUIVALENTS Amount The breakdown of “Cash and cash equivalents” is as follows: Millions of yen As of Fair value of the total consideration transferred (cash) ¥113,575 As of As of January 1, 2019 As of Fair value of assets acquired and liabilities assumed as of acquisition date December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Cash and cash equivalents 4,230 Millions of yen Thousands of U.S. dollars Trade and other receivables 1,839 Cash and deposits (maturing within three months) ¥810,546 ¥432,924 ¥423,916 $7,831,361 Inventories 1,216 Marketable securities (maturing within three months) — — 10,000 — Property, plant and equipment 1,660 Total ¥810,546 ¥432,924 ¥433,916 $7,831,361 Intangible assets 66,867 Other assets 184 Trade and other payables (18,500) NOTE 9 Fair value of assets acquired and liabilities assumed as of acquisition date, net 57,497 TRADE AND OTHER RECEIVABLES Goodwill ¥ 56,078 The breakdown of “Trade and other receivables” is as follows:

As of As of As of January 1, 2019 As of The acquisition-related costs for this business combination are ¥1,620 million, all of which are included in “Selling, general December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 and administrative expenses” in the consolidated statement of profit or loss. Millions of yen Thousands of U.S. dollars Goodwill represents excess earning power that would be expected through its future business development. Notes and accounts receivable ¥668,980 ¥743,814 ¥770,775 $6,463,575 Other 36,037 43,926 40,813 348,186 (3) Fair value of the receivables Allowance for doubtful accounts (37,256) (32,396) (29,672) (359,961) The fair values of the trade and other receivables acquired are as follows: Total ¥667,761 ¥755,344 ¥781,916 $6,451,800

Amount Trade and other receivables are presented net of allowance for doubtful accounts in the consolidated statement of finan-

Millions of yen cial position. The gross contractual amounts ¥2,144 Trade and other receivables are classified as financial assets measured at amortized cost. The best estimate at the acquisition date of the contractual cash flows not expected to be collected 305 The changes in allowance for doubtful accounts are presented in Note “34. Financial Instruments (3) Credit risk manage- Fair value of the trade and other receivables ¥1,839 ment 2) Changes in allowance for doubtful accounts.”

(4) Cash flows arising from the acquisition NOTE 10 INVENTORIES Amount

Millions of yen The breakdown of “Inventories” is as follows:

Cash and cash equivalents paid for the acquisition ¥113,575 As of Cash and cash equivalents held by the acquiree at the time of acquisition 4,230 As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Payments for acquisition of subsidiaries ¥109,345 Millions of yen Thousands of U.S. dollars Finished products ¥317,326 ¥436,034 ¥432,006 $3,065,948 (5) Effect on business performance Work in process 32,625 38,691 37,877 315,215 Profit and loss information after the acquisition date of this business combination and profit and loss information as though Raw materials and supplies 138,319 152,164 172,204 1,336,412 this business combination had been completed at the beginning of the fiscal year, are not disclosed because the impact on Other 2,971 3,273 3,837 28,705 the consolidated financial statements is immaterial. Total ¥491,240 ¥630,162 ¥645,924 $4,746,278 The amounts of inventories recognized as expenses during the fiscal years ended December 31, 2020 and 2019 are Fiscal year ended December 31, 2020 ¥1,508,515 million ($14,575,027 thousand) and ¥1,814,009 million, respectively. Not applicable.

34 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 35 Notes to Consolidated Financial Statements

NOTE 11 OTHER FINANCIAL ASSETS NOTE 12 OTHER ASSETS (1) Breakdown of other financial assets The breakdown of “Other current assets” and “Other non-current assets” are as follows: The breakdown of “Other financial assets” is as follows: (1) Other current assets

As of As of As of As of January 1, 2019 As of As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 December 31, 2020 December 31, 2019 (Transition date) December 31, 2020

Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Equity instruments ¥ 82,274 ¥ 98,650 ¥175,799 $ 794,916 Prepaid expenses ¥23,437 ¥24,978 ¥20,682 $226,444 Others 38,226 56,122 67,374 369,333 Consumption tax receivables 18,580 27,825 23,672 179,521 Total ¥120,500 ¥154,773 ¥243,173 $1,164,250 Others 34,262 27,840 34,081 331,034 Current assets 7,277 14,311 25,867 70,313 Total ¥76,279 ¥80,643 ¥78,435 $736,999 Non-current assets 113,222 140,462 217,306 1,093,937 Total ¥120,500 ¥154,773 ¥243,173 $1,164,250 (2) Other non-current assets Equity instruments are categorized as financial assets measured at fair value through other comprehensive income. As of As of As of January 1, 2019 As of (2) Financial assets measured at fair value through other comprehensive income December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Major issuers of financial assets measured at fair value through other comprehensive income and their fair value are as Millions of yen Thousands of U.S. dollars follows: Retirement benefit assets (Note 1) ¥21,392 ¥ 11,514 ¥ 5,123 $206,686 Others (Note 2) 28,842 33,102 28,205 278,664 As of Total ¥50,234 ¥44,616 ¥33,327 $485,350 As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 (Note 1) The details of retirement benefit assets are presented in Note “23. Employee Benefits (1) Post-employment benefits 3) Reconciliation of defined benefit Issuers Millions of yen Thousands of U.S. dollars obligations and plan assets.” (Note 2) “Others” mainly consists of spare parts. JSR Corporation ¥18,753 ¥12,960 ¥37,016 $ 181,191 Toyota Motor Corporation 15,595 15,119 12,555 150,675 Nokian Tyres PLC 15,248 13,089 35,764 147,325 Toyo Tire Corporation 7,840 7,875 13,750 75,749 NOTE 13 NON-CURRENT ASSETS HELD FOR SALE Sumitomo Mitsui Financial Group, Inc. 1,792 2,270 2,049 17,318 Non-current assets held for sale as of January 1, 2019 (tran- Non-current assets held for sale and liabilities directly Mitsubishi UFJ Financial Group, Inc. 1,268 1,649 1,496 12,253 sition date) mainly relates to property, plant and equipment associated with non-current assets held for sale as of the Fuji Kyuko Co., Ltd. 1,177 1,033 792 11,375 from the Americas segment. They were classified into fiscal year ended December 31, 2019 were already sold Yellow Hat Ltd. 884 1,032 691 8,545 assets held for sale as the Group has made the decision to during the fiscal year ended December 31, 2020. These stocks are designated as financial assets measured at fair value through other comprehensive income as they are sell these assets. Non-current assets held for sale and liabilities directly held for the purpose of mainly maintaining and strengthening business and collaborative relationship and for their strategic Non-current assets held for sale as of January 1, 2019 associated with non-current assets held for sale for the importance to the Group. (transition date) were sold during the fiscal year ended fiscal year ended December 31, 2020 represent certain December 31, 2019. items of property, plant and equipment and other liabilities (3) Derecognition of financial assets measured at fair value through other comprehensive income Non-current assets held for sale and liabilities directly mainly in the Americas segment. They were classified into To improve its asset efficiency and to review its business relationship and for other purposes, the Group derecognizes the associated with non-current assets held for sale for the the held-for-sale category as the Group has made a deci- financial assets measured at fair value through other comprehensive income by selling a portion of those assets. fiscal year ended December 31, 2019 represent certain items sion to sell within one year from the end of this reporting The fair values at the time of sale and cumulative gains (losses) recognized in other comprehensive income are as follows: of other assets and liabilities mainly in the Japan segment period. that belong to the unit bath business to be transferred. Fiscal year ended December 31, 2020 Fiscal year ended December 31, 2019 Fiscal year ended December 31, 2020 They were classified into the held-for-sale category as the Fair value Cumulative gains (losses) Fair value Cumulative gains (losses) Fair value Cumulative gains (losses) Group has made a decision to sell. Millions of yen Thousands of U.S. dollars ¥20,509 ¥17,290 ¥87,095 ¥76,642 $198,155 $167,052

When financial assets measured at fair value through other comprehensive income are derecognized or the fair value declines significantly, cumulative gains (losses) recognized in other comprehensive income are reclassified to retained earn- ings. The amounts of cumulative gains (losses), net of tax, which were recognized in other comprehensive income and subsequently reclassified into retained earnings, are ¥11,094 million ($107,191 thousand) and ¥61,058 million for the fiscal years ended December 31, 2020 and 2019, respectively.

36 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 37 Notes to Consolidated Financial Statements

Buildings and Machinery Tools, furniture Construction NOTE 14 PROPERTY, PLANT AND EQUIPMENT Accumulated depreciation and impairment losses structures and equipment and fixtures Land in progress Others Total The changes in the carrying amount of “Property, plant and equipment,” as well as cost, accumulated depreciation and accu- Millions of yen mulated impairment losses are as follows: Balance at January 1, 2019 ¥572,693 ¥1,634,515 ¥463,687 ¥6,738 ¥6,238 ¥39,635 ¥2,723,506 Balance at December 31, 2019 601,140 1,678,988 478,826 7,047 6,515 40,732 2,813,247 Buildings and Machinery Tools, furniture Construction Carrying amount structures and equipment and fixtures Land in progress Others Total Balance at December 31, 2020 632,651 1,762,182 493,383 5,771 17,256 42,313 2,953,555 Millions of yen Buildings and Machinery Tools, furniture Construction Balance at January 1, 2019 ¥558,331 ¥513,344 ¥93,824 ¥161,815 ¥172,989 ¥14,739 ¥1,515,042 Accumulated depreciation and impairment losses structures and equipment and fixtures Land in progress Others Total Acquisition — — — — 268,431 — 268,431 Thousands of U.S. dollars Depreciation (Note 1) (38,038) (107,586) (47,907) — — (4,845) (198,376) Balance at December 31, 2020 $6,112,567 $17,025,912 $4,766,982 $55,757 $166,728 $408,817 $28,536,762 Impairment losses (3,348) (4,323) (618) (976) (1,113) (59) (10,437) Sale or disposal (3,262) (7,372) (1,296) (1,500) (2,842) (416) (16,688) Transfer from construction in progress 60,059 128,273 45,764 8,361 (246,653) 4,196 — NOTE 15 Other changes (Note 2) (5,428) (2,662) 8,123 (140) (2,294) (401) (2,802) GOODWILL AND INTANGIBLE ASSETS Balance at December 31, 2019 ¥568,314 ¥519,674 ¥97,890 ¥167,560 ¥188,518 ¥13,214 ¥1,555,170 (1) Changes during the period Acquisition — — — — 191,657 — 191,657 The changes in the carrying amount of “Goodwill” and “Intangible assets” as well as cost, accumulated amortization and Depreciation (Note 1) (38,469) (105,371) (45,411) — — (4,885) (194,136) accumulated impairment losses are as follows: Impairment losses (18,840) (52,198) (8,004) 216 (12,182) (412) (91,420) Carrying amount Goodwill Trademarks Software Others (Note 2) Total Sale or disposal (2,146) (4,379) (1,812) (2,165) (2,838) (530) (13,870) Millions of yen Transfer from construction in progress 46,120 83,883 28,172 4,922 (167,225) 4,128 — Balance at January 1, 2019 ¥41,382 ¥12,090 ¥12,091 ¥25,529 ¥ 91,092 Exchange difference (20,493) (19,145) (3,058) (3,126) (11,177) (259) (57,258) Acquisition — — — 11,133 11,133 Other changes (4,034) 2,564 12,167 (786) (8,201) 289 1,998 Acquisition due to business combinations 57,633 4,493 22,051 40,418 124,595 Balance at December 31, 2020 ¥530,452 ¥425,028 ¥79,944 ¥166,621 ¥178,552 ¥11,545 ¥1,392,141 Amortization (Note 1) — (662) (7,980) (5,848) (14,490)

(Note 1) Depreciation of property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of Sale and retirement — — (33) (25) (58) profit or loss. Impairment losses — — (137) (33) (170) (Note 2) Exchange difference in the fiscal year ended December 31, 2019 is included in “Other changes.” Transfer of accounts — — 14,714 (14,714) — Others (669) 204 395 (22) (93) Buildings and Machinery Tools, furniture Construction Carrying amount structures and equipment and fixtures Land in progress Others Total Balance at December 31, 2019 ¥98,346 ¥16,125 ¥41,101 ¥56,438 ¥212,009

Thousands of U.S. dollars Acquisition 169 — — 17,267 17,436 Balance at December 31, 2019 $5,490,953 $ 5,021,001 $ 945,798 $ 1,618,937 $ 1,821,430 $127,673 $ 15,025,793 Amortization (Note 1) — (487) (9,436) (5,887) (15,810) Acquisition — — — — 1,851,761 — 1,851,761 Sale and retirement — (3) (33) (122) (158) Depreciation (Note 1) (371,683) (1,018,078) (438,757) — — (47,191) (1,875,708) Impairment losses (1,839) — (215) (50) (2,104) Impairment losses (182,026) (504,330) (77,338) 2,085 (117,701) (3,980) (883,289) Transfer of accounts — — 10,659 (10,659) — Sale or disposal (20,731) (42,304) (17,506) (20,920) (27,423) (5,131) (134,014) Others 970 (409) 5,937 (2,745) 3,754 Transfer from construction in progress 445,609 810,460 272,198 47,558 (1,615,699) 39,874 — Balance at December 31, 2020 ¥97,646 ¥15,226 ¥48,013 ¥54,242 ¥215,127 Exchange difference (198,002) (184,974) (29,550) (30,203) (107,992) (2,495) (553,216) (Note 1) Amortization of intangible assets is included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of profit or loss. Other changes (38,978) 24,771 117,559 (7,592) (79,234) 2,791 19,316 (Note 2) “Software in progress” is included in “Others.” Balance at December 31, 2020 $5,125,144 $ 4,106,546 $772,404 $1,609,865 $1,725,143 $ 111,541 $13,450,642 Carrying amount Goodwill Trademarks Software Others (Note 2) Total (Note 1) Depreciation of property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of profit or loss. Thousands of U.S. dollars Balance at December 31, 2019 $ 950,200 $155,796 $ 397,109 $ 545,296 $ 2,048,400

Buildings and Machinery Tools, furniture Construction Acquisition 1,629 — — 166,839 168,467 Cost structures and equipment and fixtures Land in progress Others Total Amortization (Note 1) — (4,702) (91,166) (56,888) (152,755) Millions of yen Sale and retirement — (30) (321) (1,177) (1,527) Balance at January 1, 2019 ¥ 1,131,025 ¥ 2,147,859 ¥ 557,511 ¥ 168,553 ¥ 179,227 ¥ 54,373 ¥ 4,238,548 Impairment losses (17,772) — (2,081) (471) (20,324) Balance at December 31, 2019 1,169,453 2,198,661 576,716 174,607 195,033 53,946 4,368,416 Transfer of accounts — — 102,987 (102,987) — Balance at December 31, 2020 ¥1,163,103 ¥2,187,209 ¥573,326 ¥172,392 ¥195,809 ¥53,857 ¥4,345,696 Others 9,384 (3,950) 57,361 (26,530) 36,264

Buildings and Machinery Tools, furniture Construction Balance at December 31, 2020 $943,440 $147,115 $463,890 $ 524,081 $2,078,526 Cost structures and equipment and fixtures Land in progress Others Total (Note 1) Amortization of intangible assets is included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of profit or loss. Thousands of U.S. dollars (Note 2) “Software in progress” is included in “Others.” Balance at December 31, 2020 $11,237,711 $21,132,458 $5,539,386 $1,665,622 $1,891,870 $520,359 $41,987,405

38 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 39 Notes to Consolidated Financial Statements

Cost Goodwill Trademarks Software Others Total Segments

Millions of yen Europe, Russia, Middle East, China, Consolidated Balance at January 1, 2019 ¥ 41,382 ¥ 12,153 ¥ 27,518 ¥ 42,501 ¥ 123,554 Cash-generating unit Japan Americas India and Africa Asia-Pacific Total Other total Balance at December 31, 2019 ¥ 98,599 ¥ 16,909 ¥ 67,150 ¥79,243 ¥ 261,901 Millions of yen Balance at December 31, 2020 ¥99,776 ¥16,520 ¥82,761 ¥81,580 ¥280,637 Russian passenger vehicle tire business ¥ — ¥ — ¥10,068 ¥ — ¥10,068 ¥— ¥10,068 Indian tire business — — 6,598 — 6,598 — 6,598 Cost Goodwill Trademarks Software Others Total Chinese truck and bus tire business — — — 19,581 19,581 — 19,581 Thousands of U.S. dollars Vietnamese passenger vehicle tire business — — — 9,196 9,196 — 9,196 Balance at December 31, 2020 $964,020 $159,616 $799,624 $788,211 $2,711,470 Thai small and medium mining and — — — 17,442 17,442 — 17,442 construction vehicle tire business Accumulated amortization and impairment losses Goodwill Trademarks Software Others Total Japanese Anti-vibration rubber business 6,210 — — — 6,210 — 6,210 Millions of yen Aircraft tires business 2,517 410 1,520 3,850 8,296 — 8,296 Balance at January 1, 2019 ¥ — ¥ 63 ¥ 15,427 ¥ 16,972 ¥32,462 Other 8,602 300 3,220 92 12,214 16 12,231 Balance at December 31, 2019 ¥ 253 ¥ 784 ¥ 26,049 ¥ 22,805 ¥49,892 Total ¥17,329 ¥710 ¥21,406 ¥50,161 ¥89,605 ¥16 ¥89,622 Balance at December 31, 2020 ¥2,130 ¥1,294 ¥34,748 ¥27,338 ¥65,510 Segments Accumulated amortization and impairment losses Goodwill Trademarks Software Others Total Europe, Russia, Thousands of U.S. dollars Middle East, China, Consolidated Cash-generating unit Japan Americas India and Africa Asia-Pacific Total Other total $20,580 $12,501 $335,734 $264,129 $632,944 Balance at December 31, 2020 Thousands of U.S. dollars Russian passenger vehicle tire business $ — $ — $ 97,274 $ — $ 97,274 $ — $ 97,274 (2) Material goodwill and intangible assets Indian tire business — — 63,748 — 63,748 — 63,748 The material goodwill and intangible assets recorded in the consolidated statement of financial position primarily represents Chinese truck and bus tire business — — — 189,190 189,190 — 189,190 Vietnamese passenger vehicle tire business — — — 88,855 88,855 — 88,855 the goodwill recognized through the acquisition of WEBFLEET SOLUTIONS B.V. completed during the fiscal year ended Thai small and medium mining and — — — 168,526 168,526 — 168,526 December 31, 2019 and the carrying amounts of the goodwill are ¥56,209 million ($543,080 thousand) and ¥55,168 million as construction vehicle tire business of December 31, 2020 and 2019, respectively. In addition, the goodwill recognized by this acquisition was allocated to cash- Japanese Anti-vibration rubber business 60,002 — — — 60,002 — 60,002 generating units which were expected to benefit from the synergies and belongs to WEBFLEET SOLUTIONS cash-generating Aircraft tires business 24,315 3,960 14,682 37,196 80,152 — 80,152 unit and BRIDGESTONE EUROPE cash-generating unit. Other 83,110 2,903 31,114 878 118,005 157 118,163 Total $167,428 $6,862 $206,818 $484,645 $865,753 $157 $865,910

NOTE 16 IMPAIRMENT OF NON-FINANCIAL ASSETS The major reasons for the impairment losses are as follows: (1) Impairment loss 1) “Europe, Russia, Middle East, India and Africa” segment For measuring an impairment loss, the Group groups assets for business based on the segments, which are adopted for The carrying amount of assets for business use in the Russian passenger vehicle tire business was reduced by ¥10,068 million internal management purposes, while grouping assets to be disposed of (i.e., assets planned to be disposed of by retire- ($97,274 thousand) to the recoverable amount because the intended revenue is no longer expected as a result of changes in ment, sale, etc.) and idle assets individually. the business environment, such as the impacts of COVID-19. The recoverable amount of these assets was measured by value As for impairment losses in the fiscal year ended December 31, 2019 of ¥10,620, including ¥78 million of that recorded as in use, which was calculated by discounting future cash flows at a discount rate of 10.3%. business and plant restructuring expenses, which are mainly on assets for business of which profitability had declined, assets The carrying amount of assets for business use in the Indian tire business was reduced by ¥6,598 million ($63,748 thou- planned to be disposed of or sold, and idle assets not planned to be used in future, the Group reduced the carrying amounts sand) to the recoverable amount because the intended revenue is no longer expected as a result of changes in the business of the assets to their recoverable amounts and recorded in “other expenses” as impairment losses. environment, such as the impacts of COVID-19. The recoverable amount of these assets was measured by value in use, which In addition, the recoverable amounts of the assets are principally measured at their fair value. was calculated by discounting future cash flows at a discount rate of 13.5%. Impairment losses in the fiscal year ended December 31, 2020 of ¥95,376 million ($921,505 thousand), including ¥5,754 million ($55,595 thousand) of that recorded as business and plant restructuring expenses were recorded in “other expenses” The breakdown of these impairment losses is as follows:

as impairment losses. Cash-generating unit Segment Type of Assets Amount The components of the impairment losses of ¥95,376 million by item are ¥91,420 million ($883,289 thousand) for property, Millions of yen plant and equipment, ¥2,104 million ($20,324 thousand) for goodwill and intangible assets, and ¥1,852 million ($17,892 thou- Buildings and structures ¥ 3,982 sand) for others. The breakdown by segment (excluding the amount recorded in business and plant restructuring expenses) Machinery and equipment 3,489 Russian passenger vehicle tire business is as follows: Other 2,596 Subtotal 10,068 Europe, Russia, Middle East, India and Africa Buildings and structures 1,345 Machinery and equipment 2,021 Indian tire business Construction in progress 2,589 Other 643 Subtotal 6,598 Total ¥16,666

40 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 41 Notes to Consolidated Financial Statements

Cash-generating unit Segment Type of Assets Amount 3) “Japan” segment Thousands of U.S. dollars The carrying amount of assets for business use in the Japanese anti-vibration rubber business was reduced by ¥6,210 million Buildings and structures $ 38,478 ($60,002 thousand) to the recoverable amount because the intended revenue is no longer expected as a result of changes in Machinery and equipment 33,712 Russian passenger vehicle tire business the business environment. The recoverable amount of these assets was measured at their fair value after deducting their Other 25,085 disposal cost, and is mainly calculated based on the value of a third-party appraisal determined using the market approach. Subtotal 97,274 The fair value hierarchy level is 3. Europe, Russia, Middle East, India and Africa Buildings and structures 12,996 The breakdown of this impairment loss is as follows: Machinery and equipment 19,529 Indian tire business Construction in progress 25,013 Cash-generating unit Segment Type of Assets Amount Other 6,211 Millions of yen Subtotal 63,748 Buildings and structures ¥1,322 Japan Machinery and equipment 3,517 Total $161,022 Japanese Anti-vibration rubber business Other 1,371 Total ¥6,210 2) “China, Asia-Pacific” segment Cash-generating unit Segment Type of Assets Amount The carrying amount of assets for business use in the Chinese truck and bus tire business was reduced by ¥19,581 million Thousands of U.S. dollars ($189,190 thousand) to the recoverable amount because the intended revenue is no longer expected as a result of changes in Buildings and structures $ 12,771 the business environment, such as the impacts of COVID-19. The recoverable amount of these assets was measured at their Japanese Anti-vibration rubber business Japan Machinery and equipment 33,981 fair value after deducting their disposal cost, and is mainly calculated based on the value of a third-party appraisal using the Other 13,249 market approach. The fair value hierarchy level is 3. Total $60,002 The carrying amount of idle assets in the Vietnamese passenger vehicle tire business was reduced by ¥9,196 million ($88,855 thousand) to the recoverable amount, because we do not expect these idle assets to be used for business purposes. 4) Aircraft tires business The recoverable amount of these assets was measured at their fair value after deducting their disposal cost; however, The carrying amount of assets for business use in the aircraft tire business was reduced by ¥8,296 million ($80,152 thousand) because these assets would be difficult to sell, their fair value after deducting their disposal cost was deemed to be zero. to the recoverable amount because the intended revenue is no longer expected as a result of changes in the business envi- The fair value hierarchy level is 3. ronment, such as the impacts of COVID-19. The recoverable amount of these assets was measured at their fair value after The carrying amount of assets for business use in the Thai small and medium mining and construction vehicle tire busi- deducting their disposal cost, and is mainly calculated based on the value of a third-party appraisal determined using the ness was reduced by ¥17,442 million ($168,526 thousand) to the recoverable amount because the intended revenue is no market approach. The fair value hierarchy level is 3. longer expected as a result of changes in the business environment. The recoverable amount of these assets was measured The breakdown of this impairment loss is as follows: at their fair value after deducting their disposal cost, and is mainly calculated based on the value of a third-party appraisal Cash-generating unit Segments Type of Assets Amount determined using the market approach. The fair value hierarchy level is 3. Millions of yen The breakdown of these impairment loss is as follows: Buildings and structures ¥ 972 Cash-generating unit Segment Type of Assets Amount Machinery and equipment 1,249 Japan Millions of yen Other 296 Machinery and equipment ¥17,878 Subtotal 2,517 Chinese truck and bus tire business Other 1,704 Machinery and equipment 135 Subtotal 19,581 Tools, furniture and fixtures 255 Americas Buildings and structures 5,515 Other 19 Vietnamese passenger vehicle tire business China, Asia-Pacific Construction in progress 3,681 Subtotal 410 Aircraft tires business Subtotal 9,196 Machinery and equipment 280 Machinery and equipment 12,833 Tools, furniture and fixtures 721 Thai small and medium mining and Europe, Russia, Middle East, India and Africa Other 4,610 construction vehicle tire business Other 518 Subtotal 17,442 Subtotal 1,520 Total ¥46,220 Machinery and equipment 2,357 Tools, furniture and fixtures 1,102 China, Asia-Pacific Other 391 Cash-generating unit Segment Type of Assets Amount Subtotal 3,850 Thousands of U.S. dollars Total ¥8,296 Machinery and equipment $172,730 Chinese truck and bus tire business Other 16,460 Subtotal 189,190 Buildings and structures 53,285 Vietnamese passenger vehicle tire business China, Asia-Pacific Construction in progress 35,570 Subtotal 88,855 Machinery and equipment 123,987 Thai small and medium mining and Other 44,539 construction vehicle tire business Subtotal 168,526 Total $446,571

42 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 43 Notes to Consolidated Financial Statements

Cash-generating unit Segments Type of Assets Amount NOTE 17 LEASE TRANSACTIONS Thousands of U.S. dollars Buildings and structures $ 9,389 Lessee Machinery and equipment 12,068 The Group enters into lease contracts for buildings and structures, land, etc. Japan Other 2,859 Subtotal 24,315 (1) Items related to right-of-use assets Machinery and equipment 1,308 The carrying amount, depreciation and additions to “Right-of-use assets” are as follows:

Tools, furniture and fixtures 2,467 Carrying amount Buildings and structures Land Others Total Americas Other 184 Millions of yen Subtotal 3,960 As of January 1, 2019 ¥ 243,572 ¥ 44,364 ¥ 34,734 ¥322,670 Aircraft tires business Machinery and equipment 2,706 As of December 31, 2019 ¥ 230,961 ¥ 39,452 ¥ 28,157 ¥298,569 Tools, furniture and fixtures 6,968 As of December 31, 2020 ¥228,987 ¥36,428 ¥24,707 ¥290,122 Europe, Russia, Middle East, India and Africa Other 5,008 Carrying amount Buildings and structures Land Others Total Subtotal 14,682 Thousands of U.S. dollars Machinery and equipment 22,770 As of December 31, 2020 $2,212,431 $351,962 $238,715 $2,803,109 Tools, furniture and fixtures 10,648 China, Asia-Pacific Other 3,777 Depreciation Buildings and structures Land Others Total Subtotal 37,196 Millions of yen Total $80,152 Fiscal year ended December 31, 2019 ¥ 44,192 ¥ 2,831 ¥ 9,860 ¥ 56,883 Fiscal year ended December 31, 2020 ¥45,180 ¥2,773 ¥9,555 ¥57,508

Depreciation Buildings and structures Land Others Total (2) Impairment test of goodwill In addition, out of the total goodwill related to the acqui- Thousands of U.S. dollars The Group conducts an impairment test on goodwill every sition of WEBFLEET SOLUTIONS B.V. of ¥56,209 million Fiscal year ended December 31, 2020 $436,525 $26,793 $92,319 $555,637 year or whenever there is any indication of impairment. ($543,080 thousand) (2019: 55,168 million), the carrying Among goodwill allocated to each cash-generating unit in amount allocated to WEBFLEET SOLUTIONS cash-generating Fiscal year ended Fiscal year ended Fiscal year ended the fiscal year ended December 31, 2020, the principal good- unit as of December 31, 2020 is ¥50,311 million ($486,093 December 31, 2020 December 31, 2019 December 31, 2020 Millions of yen Thousands of U.S. dollars will is recognized in WEBFLEET SOLUTIONS cash-generating thousand) (2019: ¥48,563 million). The group determines that Additions to right-of-use assets ¥61,811 ¥48,176 $597,205 unit and the impairment test was conducted as follows. the amount of the goodwill allocated to cash-generating The recoverable amount of goodwill in the impairment units other than WEBFLEET SOLUTIONS is not material test is calculated based on value in use. The value in use compared to the amount recorded in the consolidated (2) Expenses and cash outflows for leases reflects past experience and external sources of informa- statement of financial position. The lease expenses are as follows: tion and is based on the Group’s business plan for the next 3 Fiscal year ended Fiscal year ended Fiscal year ended years (2019: 3 years) as approved by the management. After (3) Impairment of investments accounted for using the December 31, 2020 December 31, 2019 December 31, 2020 the three-year plan, the Company discounts the future cash equity method Millions of yen Thousands of U.S. dollars flows to the present value using a discount rate of 8.1% of Impairment loss on investments accounted for using the Interest expense on lease liabilities ¥6,956 ¥6,317 $ 67,204 the cash-generating unit (2019: 8.1%), using the future equity method recognized in the fiscal year ended December Recognition exemptions: expenses for short-term leases 1,718 4,551 16,596 growth rate reduced from 11.1% in the 4th year (2019: 7.3%) 31, 2020 of ¥18,196 million ($175,803 thousand) is mainly Recognition exemptions: expenses for leases of low-value assets 664 308 66,416 to 2% in the 10th year (2019: 2%) and the same 2% on and relating to the carrying amount of assets of TIREHUB, LLC, Expense relating to variable lease payments not included in the measurement of lease liabilities 2,636 2,991 225,467 after the 11th year as the continuous growth rate consid- which is a jointly controlled entity in the “Americas” Gains or losses arising from sale and leaseback transactions (losses) 7,770 — 75,069 ering inflation. segment. The carrying amount was reduced by ¥17,032 There is a risk of impairment when key assumptions used million ($164,559 thousand) to the recoverable amount for impairment test change. However, as the value in use because the intended revenue is no longer expected as a Total cash outflows for leases are as follows:

sufficiently exceeds the carrying amount of the cash- result of changes in the business environment, such as the Fiscal year ended Fiscal year ended Fiscal year ended generating unit, the Group determines that it is highly impacts of COVID-19. The recoverable amount of these assets December 31, 2020 December 31, 2019 December 31, 2020 unlikely that value in use falls below the carrying amount was measured by value in use, which was calculated by Millions of yen Thousands of U.S. dollars even if key assumptions used in the impairment test fluctu- discounting future cash flows at a discount rate of 11.5%. In Total cash outflow for leases ¥61,449 ¥62,143 $593,709 ates by a reasonably foreseeable extent. addition, this impairment loss was recorded in “impairment loss related to shares using the equity method” in the (3) Maturity analysis for lease liabilities consolidated statement of profit or loss. The details are presented in Note “34. Financial Instruments (4) Liquidity risk management.”

44 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 45 Notes to Consolidated Financial Statements

NOTE 18 INCOME TAXES Fiscal year ended December 31, 2020 (1) Deferred tax assets and deferred tax liabilities As of Recognized in net Recognized in other As of January 1, 2020 profit or loss comprehensive income Others December 31, 2020

The breakdown of items giving rise to “Deferred tax assets” and “Deferred tax liabilities” and the changes thereof are as follows: Thousands of U.S. dollars Fiscal year ended December 31, 2020 Deferred tax assets

As of Recognized in net Recognized in other As of Accrued expenses $ 91,526 $ 36,787 $ — $ (7,239) $ 121,073 January 1, 2020 profit or loss comprehensive income Others December 31, 2020 Net defined benefit liability 492,379 (53,328) (36,482) (11,658) 390,910 Millions of yen Unrealized gains 176,148 (57,005) — — 119,143 Deferred tax assets Unused tax losses carryforward 109,365 (31,443) — (5,110) 72,811 Accrued expenses ¥ 9,473 ¥ 3,807 ¥ — ¥ (749) ¥ 12,531 Others 321,905 111,357 9,718 (15,164) 427,816 Net defined benefit liability 50,961 (5,519) (3,776) (1,207) 40,459 Total deferred tax assets 1,191,322 6,368 (26,764) (39,172) 1,131,754 Unrealized gains 18,231 (5,900) — — 12,331 Deferred tax liabilities Unused tax losses carryforward 11,319 (3,254) — (529) 7,536 Property, plant and equipment, and Others 33,318 11,525 1,006 (1,570) 44,279 intangible assets 605,565 10,305 — (35,623) 580,247 Total deferred tax assets 123,302 659 (2,770) (4,055) 117,136 Financial assets 197,477 — (39,368) — 158,110 Deferred tax liabilities Reserve for tax purpose reduction entry of non-current assets 151,817 14,970 — — 166,787 Property, plant and equipment, and intangible assets 62,676 1,067 — (3,687) 60,056 Others 77,355 (46,251) — (6,601) 24,503 Financial assets 20,439 — (4,075) — 16,364 Total deferred tax liabilities 1,032,214 (20,977) (39,368) (42,224) 929,646 Reserve for tax purpose reduction entry Net deferred tax assets $ 159,108 $ 27,344 $ 12,604 $ 3,052 $ 202,108 of non-current assets 15,713 1,549 — — 17,262 Others 8,006 (4,787) — (683) 2,536 Total deferred tax liabilities 106,834 (2,171) (4,075) (4,370) 96,218 The breakdown of deferred tax assets and liabilities in the consolidated statement of financial position are as follows: Net deferred tax assets ¥ 16,468 ¥ 2,830 ¥ 1,305 ¥ 315 ¥ 20,918 As of As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020

Fiscal year ended December 31, 2019 Millions of yen Thousands of U.S. dollars

As of Recognized in net Recognized in other As of Deferred tax assets ¥49,409 ¥60,711 ¥57,379 $477,382 January 1, 2019 profit or loss comprehensive income Others December 31, 2019 Deferred tax liabilities 28,491 44,243 46,613 275,274 Millions of yen Net deferred tax assets ¥ 20,918 ¥16,468 ¥10,766 $202,108 Deferred tax assets Accrued expenses ¥ 8,080 ¥ 1,385 ¥ — ¥ 8 ¥ 9,473 Net defined benefit liability 52,459 515 (1,641) (372) 50,961 Deferred tax assets belonging to the taxable entities, which recorded loss during the fiscal year ended December 31, 2019 Unrealized gains 18,847 (616) — — 18,231 or 2020, out of deferred tax assets as of December 31, 2020, December 31, 2019 and January 1, 2019 (transition date) are Unused tax losses carryforward 10,357 1,159 — (197) 11,319 ¥31,583 million ($305,152 thousand), ¥2,204 million and ¥1,725 million, respectively. For recognizing these deferred tax Others 34,334 2,417 (2,690) (743) 33,318 assets, the Group considers if deductible temporary differences and a part or all of unused tax losses carryforward can be Total deferred tax assets 124,077 4,860 (4,331) (1,304) 123,302 used for future taxable income. For an assessment of the recoverability of deferred tax assets, the Group considers deferred Deferred tax liabilities tax liabilities planned to be reversed and expected future taxable income and tax planning. As for recognized deferred tax Property, plant and equipment, and assets, the Group determines that tax benefits will be highly likely realized based on the taxable income level in the past and intangible assets 50,690 (593) — 12,579 62,676 Financial assets 36,606 — (16,167) — 20,439 the prediction of future taxable income in the period during which deferred tax assets can be recognized. Reserve for tax purpose reduction entry The deductible temporary differences and unused tax losses carryforward for which deferred tax assets were not recog- of non-current assets 10,159 5,554 — — 15,713 nized are as follows: Others 15,856 (6,703) (1,008) (139) 8,006 Total deferred tax liabilities 113,311 (1,742) (17,175) 12,440 106,834 As of As of As of January 1, 2019 As of Net deferred tax assets ¥ 10,766 ¥ 6,602 ¥ 12,844 ¥(13,744) ¥ 16,468 December 31, 2020 December 31, 2019 (Transition date) December 31, 2020

Millions of yen Thousands of U.S. dollars Deductible temporary differences ¥ 117,880 ¥ 28,291 ¥ 21,944 $1,138,939 Unused tax losses carryforward 208,785 122,029 117,344 2,017,244 Total ¥326,665 ¥150,320 ¥139,288 $3,156,183

46 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 47 Notes to Consolidated Financial Statements

The unused tax losses carryforward and unused tax credits carryforward for which deferred tax assets were not recog- (3) Reconciliation of effective tax rate nized will expire as follows: The breakdown of the primary factors contributing to differences between the statutory effective tax rates and the effective income tax rates after adjustments for tax effects is as follows: As of As of As of January 1, 2019 As of The Company is subject to corporation tax, inhabitant tax and business tax. The statutory effective tax rates calculated December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 based on these taxes are 30.6% and 30.6% for the fiscal years ended December 31, 2020 and 2019, respectively. Overseas Millions of yen Thousands of U.S. dollars consolidated subsidiaries, however, are subject to local corporate and other taxes. Unused tax losses carryforward Within 5 years ¥ 39,579 ¥ 42,233 ¥ 43,903 $ 382,405 Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 After 5 years 169,206 79,796 73,441 1,634,839 % Total unused tax losses carryforward ¥208,785 ¥122,029 ¥117,344 $ 2,017,244 Statutory effective tax rate 30.6 30.6 Unused tax credits carryforward (Adjustments) Within 5 years 4,407 255 505 42,576 Items not categorized as temporary differences (9.6) 1.2 After 5 years 6,174 9,938 11,406 59,651 Effects from reassessment of the recoverability of deferred tax assets 157.5 1.3 Total unused tax credits carryforward ¥ 10,581 ¥ 10,193 ¥ 11,911 $ 102,227 Tax credits for experiment and research expenses of domestic companies (12.5) (1.4) Differences in applicable tax rates of consolidated subsidiaries 1.3 (3.1) Total temporary differences arising from the investments in subsidiaries and associates or interests in joint arrangements, Tax adjustments for overseas subsidiaries (3.6) (1.4) which are not recognized as deferred tax liabilities for the fiscal year ended December 31, 2020 amount to ¥338,229 million Others 3.7 (0.6) ($3,267,915 thousand), ¥474,565 million and ¥462,204 million, as of December 31, 2020, December 31, 2019 and January 1, Effective income tax rates after adjustments for tax effect accounting 167.4 26.6 2019 (transition date), respectively. Deferred tax liabilities related to the above temporary differences are not recognized as the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse it in the foreseeable future. NOTE 19 TRADE AND OTHER PAYABLES The breakdown of “Trade and other payables” is as follows: (2) Income tax expense The breakdown of “Income tax expense” is as follows. As of As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 Millions of yen Thousands of U.S. dollars

Millions of yen Thousands of U.S. dollars Notes and accounts payable ¥188,932 ¥202,077 ¥233,996 $1,825,429 Current income tax expense ¥52,792 ¥96,234 $510,069 Other payables 139,410 161,223 169,818 1,346,954 Deferred income tax expense (3,796) (7,015) (36,672) Accrued expenses 91,798 89,770 93,359 886,936 Total income tax expense ¥48,997 ¥89,219 $473,397 Total ¥420,140 ¥453,069 ¥497,173 $4,059,319

Trade and other payables (excluding accrued expenses) are classified as financial liabilities measured at amortized cost. Income taxes recognized on sale of the financial assets measured at fair value through other comprehensive income are as follows:

Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars Income tax expense ¥5,177 ¥18,158 $50,012

48 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 49 Notes to Consolidated Financial Statements

NOTE 20 BONDS AND BORROWINGS (INCLUDING OTHER FINANCIAL LIABILITIES) NOTE 21 PROVISIONS (1) Breakdown of financial liabilities “Provisions” is recorded as current liabilities and non-current liabilities in the consolidated statement of financial position. The breakdown of “Bonds and borrowings,” “Lease liabilities” and “Other financial liabilities” are as follows: The breakdown of “Provisions” and the changes are as follows: Fiscal year ended December 31, 2020 As of Average As of As of January 1, 2019 As of interest rate Repayment Provision for Provision for business December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 (Note 1) deadline compensation for Provision for loss on and plant restructuring industrial accidents litigation expenses Others Total Millions of yen Thousands of U.S. dollars % Millions of yen Short-term borrowing ¥ 185,693 ¥ 131,753 ¥ 97,339 $ 1,794,134 0.7 — Balance at January 1, 2020 ¥15,109 ¥12,935 ¥ 390 ¥ 29,846 ¥ 58,280 Current portion of long-term borrowing 108,285 3,688 24,244 1,046,231 0.3 — Increase 6,419 12,893 28,917 25,035 73,264 Current portion of bonds — — 69,973 — — — Decrease (used) (8,346) (5,999) (40) (19,397) (33,781) Long-term borrowing January 2022 Decrease (reversed) (627) (2,395) — (4,958) (7,980) 62,617 56,162 60,241 604,999 2.7 – June 2025 Exchange differences on translation of Bonds April 2022 foreign operations (816) (1,295) 1,129 (513) (1,495) 349,442 349,352 149,736 3,376,253 0.2 – April 2029 Others — — — 248 248 Short-term lease liabilities 53,966 52,827 52,097 521,412 2.2 — Balance at December 31, 2020 ¥11,739 ¥16,139 ¥30,396 ¥ 30,261 ¥ 88,536 Long-term lease liabilities January 2022 246,187 250,685 271,179 2,378,616 2.1 – October 2105 Fiscal year ended December 31, 2019 Other 43,279 40,565 36,820 418,154 — — Total ¥1,049,469 ¥885,033 ¥761,629 $10,139,800 — — Provision for Provision for business compensation for Provision for loss on and plant restructuring Current liabilities 377,286 215,897 268,649 3,645,276 — — industrial accidents litigation expenses Others Total Non-current liabilities 672,183 669,136 492,979 6,494,524 — — Millions of yen Total ¥1,049,469 ¥885,033 ¥761,629 $10,139,800 — — Balance at January 1, 2019 ¥14,291 ¥12,536 ¥ 4,335 ¥ 26,130 ¥ 57,292 Increase 7,231 5,824 — 18,299 31,354 (Note 1) “Average interest rate” represents the weighted average interest rates for the balances at December 31, 2020. (Note 2) Bonds and borrowings are categorized as financial liabilities measured at amortized cost. Decrease (used) (4,879) (3,598) (1,497) (10,792) (20,766) Decrease (reversed) (1,345) (1,348) (2,447) (4,282) (9,421) The terms for the different bonds that have been issued are summarized below: Exchange differences on translation of foreign operations (189) (479) — 404 (264) As of Others — — — 86 86 As of As of January 1, 2019 As of Balance at December 31, 2019 ¥15,109 ¥12,935 ¥ 390 ¥ 29,846 ¥ 58,280 December 31, December 31, (Transition December 31, Interest rate Company name Issue Issuance date 2020 2019 date) 2020 (%) Collateral Maturity date Thousands of Millions of yen U.S. dollars Fiscal year ended December 31, 2020 Bridgestone The 8th September 26, ¥ — ¥ — ¥ 69,973 $ — 0.2 None September 26, Corporation unsecured bonds 2014 2019 Provision for Provision for business compensation for Provision for loss on and plant restructuring Bridgestone The 9th April 21, 2017 39,979 39,968 39,952 386,267 0.1 None April 21, 2022 industrial accidents litigation expenses Others Total Corporation unsecured bonds Thousands of U.S. dollars Bridgestone The 10th April 21, 2017 49,941 49,930 49,912 482,526 0.2 None April 19, 2024 Corporation unsecured bonds Balance at January 1, 2020 $145,981 $124,976 $ 3,768 $ 288,364 $ 563,089 Bridgestone The 11th April 21, 2017 59,898 59,887 59,872 578,725 0.3 None April 21, 2027 Increase 62,017 124,574 279,393 241,881 707,865 Corporation unsecured bonds Decrease (used) (80,638) (57,957) (384) (187,408) (326,387) Bridgestone The 12th April 19, 2019 49,935 49,917 — 482,463 0.1 None April 19, 2024 Corporation unsecured bonds Decrease (reversed) (6,054) (23,143) — (47,907) (77,105) Bridgestone The 13th April 19, 2019 49,906 49,891 — 482,188 0.2 None April 17, 2026 Exchange differences on translation of Corporation unsecured bonds foreign operations (7,883) (12,513) 10,908 (4,953) (14,441) Bridgestone The 14th April 19, 2019 99,783 99,759 — 964,083 0.4 None April 19, 2029 Others — — — 2,395 2,395 Corporation unsecured bonds Balance at December 31, 2020 $113,423 $155,937 $293,685 $ 292,373 $ 855,418 Total — ¥349,442 ¥349,352 ¥219,709 $3,376,253 — — —

(1) Provision for compensation for industrial accidents (2) Assets pledged as collateral for liabilities The Group estimates and records an amount based on past and current experience to prepare for the payment of the medical Assets pledged as collateral for liabilities are as follows: expenses, the absence from work compensation, etc. incurred as a result of industrial accidents. The outflow of the economic benefits is supposed to occur mainly within one year from the end of the fiscal year 2020. As of As of As of January 1, 2019 As of Assets pledged as collateral for liabilities December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 (2) Provision for loss on litigation Millions of yen Thousands of U.S. dollars To prepare for the expenditures of litigation-related expense, the Group estimates and records an amount of compensation Cash and cash equivalents ¥186 ¥ — ¥ — $1,798 for damages, settlement package, etc. that is currently expected to be incurred in the future. The outflow of the economic Property, plant and equipment 491 494 496 4,748 benefits is supposed to occur mainly within one year from the end of the fiscal year 2020. Total ¥678 ¥494 ¥496 $6,546

50 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 51 Notes to Consolidated Financial Statements

(3) Provision for business and plant restructuring expenses 1) Reconciliation of defined benefit obligations Due to the commencement of discussions for the closure of its overseas tire plants, the Group estimates and records an The changes in the defined benefit obligations are as follows: amount that is currently expected to be incurred in the future to prepare for the related expenditures. The outflow of the Fiscal year ended Fiscal year ended Fiscal year ended economic benefits is supposed to occur mainly within one year from the end of the fiscal year 2020. December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars (4) Others Present value of defined benefit obligations at beginning of period (Note) ¥878,484 ¥819,430 $8,487,769 “Others” includes asset retirement obligations, provision for environmental expenses and provision for product warranties. Service cost 15,433 14,550 149,114 Interest expense 16,882 23,324 163,111 Remeasurements Actuarial gains and losses arising from changes in demographic assumptions (2,852) 7,244 (27,551) NOTE 22 OTHER CURRENT LIABILITIES Actuarial gains and losses arising from changes in financial assumptions 50,745 66,968 490,287 The breakdown of “Other current liabilities” is as follows: Actuarial gains and losses arising from experience adjustments 11,014 1,905 106,412

As of Past service cost and gains and losses on settlement (8,276) (439) (79,963) As of As of January 1, 2019 As of Benefits paid (56,872) (52,809) (549,493) December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Exchange differences on translation of foreign operations (32,393) (5,529) (312,971) Millions of yen Thousands of U.S. dollars Others (1,363) 3,840 (13,173) Bonuses to officers and employees ¥ 36,329 ¥ 34,674 ¥ 33,883 $ 351,000 Present value of defined benefit obligations at end of period (Note) ¥870,802 ¥878,484 $8,413,542 Refund liabilities 35,682 33,177 28,141 344,752 Provision for unused paid absences 22,266 21,945 20,925 215,129 (Note) The weighted-average durations of the defined benefit obligations of the Group are 12.6 years, 12.5 years and 11.9 years, as of December 31, 2020, December 31, 2019 and January 1, 2019 (transition date), respectively. Contract liabilities 13,976 16,517 15,788 135,037 Consumption tax payables 12,461 8,445 8,538 120,400 2) Reconciliation of plan assets Others 23,812 24,221 15,914 230,066 The changes in the plan assets are as follows: Total ¥144,526 ¥138,980 ¥123,190 $1,396,385 Fiscal year ended Fiscal year ended Fiscal year ended The details of contract liabilities are presented in Note “26. Revenue.” December 31, 2020 December 31, 2019 December 31, 2020

Millions of yen Thousands of U.S. dollars Fair value of the plan assets at beginning of period ¥678,705 ¥616,920 $6,557,533 NOTE 23 EMPLOYEE BENEFITS Interest revenue 12,832 17,779 123,976 Remeasurements (1) Post-employment benefits Return on plan assets 69,891 80,961 675,273 The Group has adopted both funded and unfunded defined benefit plans and defined contribution plans as retirement bene- Contribution from employers (Note 1) (Note 2) 18,281 13,431 176,624 fits for its employees. The funded defined benefit plans are managed by pension funds that are legally segregated from the Benefits paid (53,381) (48,751) (515,762) Group. The board of directors of pension funds and pension trustees are required by law to act in the best interests of the Exchange differences on translation of foreign operations (28,079) (4,511) (271,291) participants and are responsible for managing the plan assets in accordance with the prescribed policies. Others 2,633 2,876 25,457 The Group’s defined benefit plans are exposed to the following risks: Fair value of the plan assets at end of period ¥700,882 ¥678,705 $6,771,809 (i) Investment risk (Note 1) The Group and its pension funds, in accordance with the laws and regulations, periodically conduct financial verifications and recalculate the amount of The present value of the defined benefit obligations is calculated based on a discount rate that is determined by reference to contributions for the purpose of appropriating funds for future benefit accruals and maintaining a balanced pension fund in case of a deficit. market yields on high quality corporate bonds at the fiscal year-end. In the event that the investment yields for the plan (Note 2) The Group plans to make contribution of ¥20,290 million in the fiscal year ending December 31, 2021. assets fall below the discount rate, there is a risk of reduction in equity due to a deterioration of the funded status. (ii) Interest rate risk 3) Reconciliation of defined benefit obligations and plan assets In the event that the discount rate is reduced due to a decline in market yields on high quality corporate bonds, the present value The relationship between the defined benefit obligations, the plan assets and the retirement benefit liabilities (assets) on the of the defined benefit obligations increases, resulting in a risk of reduction in equity because of the worsened funded status. consolidated statement of financial position are as follows:

As of As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020

Millions of yen Thousands of U.S. dollars Present value of the funded defined benefit obligations ¥ 793,445 ¥ 802,525 ¥ 743,837 $ 7,666,136 Fair value of the plan assets (700,882) (678,705) (616,920) (6,771,809) Subtotal 92,563 123,820 126,917 894,328 Present value of the unfunded defined benefit obligations 77,357 75,959 75,593 747,412 Effect of asset ceiling 367 326 295 3,546 Retirement benefit liabilities (assets) ¥ 170,287 ¥ 200,105 ¥ 202,805 $ 1,645,285

Amounts on the consolidated statement of financial position Retirement benefit liabilities 191,679 211,619 207,928 1,851,971 Retirement benefit assets (21,392) (11,514) (5,123) (206,686) Retirement benefit liabilities (assets) on the consolidated statement of financial position ¥ 170,287 ¥ 200,105 ¥ 202,805 $ 1,645,285

52 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 53 Notes to Consolidated Financial Statements

4) Major components of plan assets 6) Items related to actuarial assumptions The major components of plan assets by category are as follows: Significant actuarial assumptions as of December 31, 2020, December 31, 2019 and January 1, 2019 (transition date) are as follows: As of As of As of January 1, 2019 As of As of As of As of January 1, 2019 December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 December 31, 2020 December 31, 2019 (Transition date) Quoted price Quoted price Quoted price Quoted price in active markets in active markets in active markets in active markets %

Quoted Unquoted Total Quoted Unquoted Total Quoted Unquoted Total Quoted Unquoted Total Discount rate 1.8 2.4 3.2

Millions of yen Thousands of U.S. dollars (Note) Valuation of the defined benefit obligations includes a judgment of future uncertain events. Sensitivity of the defined benefit obligation to changes in the major Debt instruments ¥364,854 ¥ 5,532 ¥370,386 ¥371,189 ¥ 4,484 ¥375,673 ¥291,664 ¥ 4,060 ¥295,724 $3,525,155 $ 53,444 $3,578,599 base rate as at the end of the fiscal year is as follows: Although the sensitivity assumes that all the other variables remain constant, practically they do not always change independently. Negative figures represent a decrease in the defined benefit obligations and positive figures an increase in them. Japan 10,085 2,083 12,168 11,061 1,452 12,513 9,481 1,446 10,927 97,439 20,122 117,561 Overseas 354,769 3,449 358,218 360,128 3,032 363,160 282,183 2,614 284,797 3,427,716 33,322 3,461,038

Equity instruments 32,045 19,283 51,328 37,212 23,395 60,607 32,859 19,713 52,572 309,607 186,313 495,920 As of As of As of January 1, 2019 As of Japan 1,466 — 1,466 8,580 2,853 11,433 6,902 2,318 9,220 14,161 — 14,161 Changes in base rate December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 Overseas 30,579 19,283 49,862 28,632 20,542 49,174 25,957 17,395 43,352 295,445 186,313 481,758 Millions of yen Thousands of U.S. dollars Cash and cash equiva- Discount rate 0.5% increase ¥(62,657) ¥(62,307) ¥(54,131) $(605,385) lents 26,387 29,690 56,077 11,690 23,861 35,551 6,984 19,227 26,211 254,950 286,863 541,813 0.5% decrease 69,074 68,962 59,633 667,379 Alternative investments (Note) 52,404 116,816 169,220 43,291 110,806 154,097 44,192 145,790 189,982 506,320 1,128,660 1,634,979 Other 867 53,004 53,871 987 51,790 52,777 181 52,250 52,431 8,379 512,119 520,498 7) Defined contribution plan Total ¥476,557 ¥224,325 ¥700,882 ¥464,369 ¥214,336 ¥678,705 ¥375,880 ¥241,040 ¥616,920 $4,604,411 $2,167,398 $ 6,771,809 The amounts of contributions paid to the defined contribution plan are ¥14,312 million ($138,284 thousand) and ¥16,119 (Note) Alternative investments include investments such as trusteed pension assets, real estate fund, and hedge fund. million for the fiscal years ended December 31, 2020 and 2019, respectively.

The investment management policy of the Group for the major plans are as follows: (2) Employee benefit expenses (Japan) Employee benefit expenses that are included in “Cost of sales,” “Selling, general and administrative expenses,” “Other The Company’s policy aims for managing plan assets to secure stable returns over the medium to long term so that it can expenses” and “Finance costs” in the consolidated statement of profit or loss are as follows: ensure payment of defined benefit obligations in the future, in accordance with internal regulations. More specifically, the Group sets a target return and asset allocation that is within the range of tolerable risk defined annually, and it manages its Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020

managing assets by keeping such allocation. When assessing the asset allocation, the Group examines whether to introduce Millions of yen Thousands of U.S. dollars the type of plan assets that is closely linked to changes in defined benefit obligations. Employee benefit expenses ¥11,207 ¥19,656 $108,276 Furthermore, in the event of an unexpected event in the market environment, the Group is able to temporarily adjust the weighting of risk assets in accordance with the internal regulations.

(Overseas) NOTE 24 EQUITY AND OTHER COMPONENTS OF EQUITY The policies for managing plan assets of the foreign subsidiaries are established by pension trustees and the managements (1) Common stock and capital surplus of the foreign subsidiaries are in accordance with the laws of each country. The objective of such policies is to secure invest- The Companies Act provides that at least half of the paid-in capital shall be appropriated as common stock, and the ment income that exceeds the changes in the value of liabilities while managing the risks arising from defined benefit remaining amount may be appropriated as legal capital surplus within capital surplus. The Companies Act also provides that obligations. legal capital surplus may be appropriated as common stock pursuant to a resolution at the shareholders’ meeting. The core part of the plan assets is invested in bonds linked to the defined benefit obligations. The remaining part of the plan assets is invested mainly in the stocks to earn long-term income. 1) Number of shares authorized The numbers of authorized shares are 1,450,000,000 shares, 1,450,000,000 shares and 1,450,000,000 shares as of January 1, 5) Reconciliation of the effect of the asset ceiling 2019 (transition date), December 31, 2019 and December 31, 2020, respectively. The changes in the effect of the asset ceiling are as follows: 2) Number of shares issued and fully paid Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 The changes in the number of shares issued and the balances of common stock and capital surplus are as follows:

Millions of yen Thousands of U.S. dollars Number of issued shares Effect of asset ceiling at beginning of period ¥326 ¥295 $3,151 of ordinary shares Common stock Capital surplus Remeasurements Shares Millions of yen Change in the effect of asset ceiling 45 27 437 As of January 1, 2019 (Transition date) 761,536,421 ¥126,354 ¥121,998 Exchange differences on translation of foreign operations (4) 4 (42) Increase (decrease) — ¥ — ¥ — Effect of asset ceiling at end of period ¥367 ¥326 $3,546 As of December 31, 2019 761,536,421 ¥126,354 ¥121,998 Increase (decrease) (Note 2) (47,838,200) ¥ — ¥ 118 As of December 31, 2020 713,698,221 ¥126,354 ¥122,116

54 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 55 Notes to Consolidated Financial Statements

Common stock Capital surplus (4) Retained earnings Thousands of U.S. dollars The Companies Act provides that an amount equal to 10% of the dividends paid from surplus shall be transferred to legal As of December 31, 2019 $1,220,812 $1,178,724 capital surplus and legal retained earnings until the aggregate amount of legal capital surplus and legal retained earnings Increase (decrease) (Note 2) — 1,142 equals 25% of the nominal value of common stock. The amount accumulated in legal retained earnings may be used to offset As of December 31, 2020 $1,220,812 $1,179,867 deficit. Furthermore, such legal retained earnings may be reversed pursuant to a resolution at the shareholders’ meeting. (Note 1) The shares issued by the Company are ordinary shares with no par value and have no restrictions on any rights. (Note 2) The decrease in the number of issued shares during the fiscal year ended December 31, 2020 is due to retirement of treasury stock.

NOTE 25 (2) Treasury stock DIVIDENDS The changes in the number of shares and balance of treasury stock are as follows: (1) The amount of dividends paid Fiscal year ended December 31, 2020 Number of shares Amount Total amount of Dividend per Shares Millions of yen Classes of shares dividends share Record date Effective date As of January 1, 2019 (Transition date) 9,726,528 ¥ 32,648 (Resolution) Millions of yen Yen Increase (decrease) (Note 2) 47,754,726 199,682 Annual Shareholders’ Meeting held on March 24, 2020 Ordinary shares ¥56,325 ¥80 December 31, 2019 March 25, 2020 As of December 31, 2019 57,481,254 ¥ 232,330 Board Meeting held on August 7, 2020 Ordinary shares 35,206 50 June 30, 2020 September 1, 2020 Increase (decrease) (Note 2) (47,914,746) (193,674) As of December 31, 2020 9,566,508 ¥ 38,657 Fiscal year ended December 31, 2019 Amount Total amount of Dividend per Thousands of U.S. dollars Classes of shares dividends share Record date Effective date As of December 31, 2019 $ 2,244,736 (Resolution) Millions of yen Yen Increase (decrease) (Note 2) (1,871,243) Annual Shareholders’ Meeting held on March 22, 2019 Ordinary shares ¥60,145 ¥80 December 31, 2018 March 25, 2019 As of December 31, 2020 $ 373,493 Board Meeting held on August 9, 2019 Ordinary shares 57,556 80 June 30, 2019 September 2, 2019

(Note 1) The Company has adopted the stock option plan and appropriated shares of treasury stock for the delivery of shares upon exercise of these options. The terms of the contract and the amounts, etc. are presented in Note “33. Share-based Payment.” (Note 2) The number of treasury stock acquired based on the resolution of the Board of Directors for the fiscal year ended December 31, 2019 was 47,838,200 shares and Fiscal year ended December 31, 2020 the total acquisition amount was ¥200,000 million, while the number of shares retired in the fiscal year ended December 31, 2020 was 47,838,200 shares and the total retirement amount was ¥193,364 million ($1,868,250 thousand). The increases by purchase of shares less than one unit were 916 shares and 842 shares, Total amount of Dividend per Classes of shares dividends share Record date Effective date and the decreases due to the exercise of stock options etc. were 84,390 shares and 77,388 shares for the fiscal years ended December 31, 2019 and 2020, Thousands of U.S. respectively. (Resolution) dollars U.S. dollars Annual Shareholders’ Meeting held on March 24, 2020 Ordinary shares $544,200 $0.77 December 31, 2019 March 25, 2020 (3) Other components of equity Board Meeting held on August 7, 2020 Ordinary shares 340,154 0.48 June 30, 2020 September 1, 2020 1) Stock acquisition rights The Company has adopted the stock option plan and issued stock acquisition rights in accordance with the Companies Act. (2) Dividends that will be effective in the following fiscal year of the record date The terms of the contract and the amounts, etc. are presented in Note “33. Share-based Payment.” Fiscal year ended December 31, 2020

Total amount of Dividend per 2) Exchange differences on translation of foreign operations Classes of shares dividends share Record date Effective date The exchange differences on translation of foreign operations occur when the financial statements of the foreign operations (Resolution) Millions of yen Yen prepared using foreign currencies are consolidated. Annual Shareholders’ Meeting held on March 26, 2021 Ordinary shares ¥42,248 ¥60 December 31, 2020 March 29, 2021

3) Effective portion of change in fair value of cash flow hedges Fiscal year ended December 31, 2019 The Company hedges the risk of variability in future cash flows through hedges, and this is the portion of the changes in fair Total amount of Dividend per value of the derivative instruments designated as cash flow hedges, which are deemed to be effective. Classes of shares dividends share Record date Effective date (Resolution) Millions of yen Yen 4) Net change in fair value of financial assets measured through other comprehensive income Annual Shareholders’ Meeting held on March 24, 2020 Ordinary shares ¥56,325 ¥80 December 31, 2019 March 25, 2020 This is the valuation difference of the fair values of financial assets measured through other comprehensive income.

Fiscal year ended December 31, 2020 5) Remeasurements of defined benefit plans Remeasurements of defined benefit plans result actuarial gains and losses and arise from the present value of defined Total amount of Dividend per Classes of shares dividends share Record date Effective date benefit obligations, return on plan assets (except for amounts included in net interest), and changes in the effect of the asset Thousands of U.S. (Resolution) ceiling (except for amounts included in net interest). They are recognized in other comprehensive income when they arise, dollars U.S. dollars Annual Shareholders’ Meeting held on March 26, 2021 Ordinary shares $408,194 $0.58 December 31, 2020 March 29, 2021 and reclassified from other components of equity to retained earnings immediately.

56 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 57 Notes to Consolidated Financial Statements

NOTE 26 REVENUE Total beginning balances of the contract liabilities for the fiscal years ended December 31, 2019 and 2020 are recognized as revenue in each fiscal year. The amount of revenue recognized from performance obligations satisfied in the previous (1) Disaggregation of revenue periods is not material for the fiscal year ended December 31, 2020. The breakdown of revenue is as follows: The contract liabilities are presented as “Other current liabilities” and “Other non-current liabilities” in the consolidated Fiscal year ended December 31, 2020 statement of financial position. Reportable segments Contract liabilities primarily relate to advances received from customers. Europe, Russia, Middle East, China, Asia- Corporate or Consolidated Japan Americas India and Africa Pacific Total Others elimination total

Millions of yen (3) Transaction price allocated to the remaining performance obligations Tires ¥423,217 ¥1,154,105 ¥553,495 ¥342,870 ¥2,473,687 ¥15,278 ¥32 ¥2,488,997 The amount of revenue related to the unsatisfied performance obligations (or partially unsatisfied) that is expected to be Others (Note 1) 184,887 248,042 3,348 2,794 439,070 66,457 — 505,527 recognized in the future at the end of the fiscal year ended December 31, 2020 is as follows: Total external revenue ¥608,103 ¥1,402,147 ¥556,843 ¥345,664 ¥2,912,757 ¥81,735 ¥32 ¥2,994,524 As of As of Revenue recognized from December 31, 2020 December 31, 2020 contracts with customers 607,443 1,395,051 544,203 340,542 2,887,239 81,735 32 2,969,006 Millions of yen Thousands of U.S. dollars Revenue recognized from other sources (Note 2) 660 7,096 12,640 5,122 25,518 — — 25,518 Within one year ¥24,513 $236,842 Over one year and within five years 32,792 316,829 (Note 1) “Others” includes businesses such as Chemical and Industrial Products, BSAM Diversified Products, sporting goods and bicycles that the Company operates in. (Note 2) Revenue recognized from other sources includes lease income based on IFRS 16. As the Group has applied the practical expedient provided in paragraph C5(d) of IFRS 15, it does not disclose the amount of the transaction price allocated to the remaining performance obligations and an expectation of when the entity recognizes Fiscal year ended December 31, 2019 that amount for the fiscal year ended December 31, 2019. Reportable segments As the Group has also applied the practical expedient provided in paragraph 121 of IFRS 15, it does not disclose information Europe, Russia, Middle East, China, Asia- Corporate or Consolidated about the remaining performance obligation that has an original expected duration of one year or less. Japan Americas India and Africa Pacific Total Others elimination total

Millions of yen Tires ¥493,873 ¥1,394,453 ¥626,215 ¥398,987 ¥ 2,913,528 ¥ 28,442 ¥41 ¥2,942,010 Others (Note 1) 224,613 258,392 4,410 3,724 491,139 74,094 — 565,233 NOTE 27 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Total external revenue ¥ 718,485 ¥1,652,845 ¥630,625 ¥ 402,711 ¥3,404,667 ¥102,536 ¥41 ¥3,507,243 The breakdown of “Selling, general and administrative expenses” is as follows: Revenue recognized from contracts with customers 718,485 1,641,932 612,650 393,927 3,366,994 102,536 41 3,469,571 Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 Revenue recognized from other sources (Note 2) — 10,913 17,975 8,785 37,672 — — 37,672 Millions of yen Thousands of U.S. dollars Freight ¥155,546 ¥182,756 $1,502,856 (Note 1) “Others” includes businesses such as Chemical and Industrial Products, BSAM Diversified Products, sporting goods and bicycles that the Company operates in. (Note 2) Revenue recognized from other sources includes lease income based on IFRS 16. Advertising and sales promotional expenses 97,442 115,168 941,467 Employee benefit expenses 264,847 279,158 2,558,912 Fiscal year ended December 31, 2020 Depreciation and amortization 89,906 89,534 868,656 Research and development expenses (Note) 95,205 106,202 919,859 Reportable segments Europe, Russia, Others 204,254 225,543 1,973,466 Middle East, China, Asia- Corporate or Consolidated Japan Americas India and Africa Pacific Total Others elimination total Total ¥907,200 ¥998,360 $8,765,217 Thousands of U.S. dollars (Note) All research and development expenses recognized as expenses are included in “Selling, general and administrative expenses.” Tires $4,089,049 $11,150,772 $5,347,779 $3,312,754 $23,900,355 $147,618 $305 $24,048,278 Others (Note 1) 1,786,346 2,396,537 32,349 26,994 4,242,226 642,096 — 4,884,322 Total external revenue $5,875,396 $13,547,309 $5,380,128 $3,339,747 $28,142,581 $789,714 $305 $28,932,599 NOTE 28 Revenue recognized from OTHER INCOME AND OTHER EXPENSES contracts with customers 5,869,019 13,478,752 5,258,000 3,290,258 27,896,029 789,714 305 28,686,048 The breakdown of “Other income” and “Other expenses” are as follows: Revenue recognized from (1) Other income other sources (Note 2) 6,377 68,557 122,128 49,489 246,551 — — 246,551 Fiscal year ended Fiscal year ended Fiscal year ended (Note 1) “Others” includes businesses such as Chemical and Industrial Products, BSAM Diversified Products, sporting goods and bicycles that the Company operates in. December 31, 2020 December 31, 2019 December 31, 2020 (Note 2) Revenue recognized from other sources includes lease income based on IFRS 16. Millions of yen Thousands of U.S. dollars (2) Contract balances Gain on sale of fixed assets (Note 2) ¥24,192 (Note 1) ¥30,418 (Note 2) $233,744 Contract balances of the Group consist of receivables, contract assets and contract liabilities arising from contracts with Settlement package and compensation 804 5,738 7,764 customers. In the consolidated statement of financial position, receivables arising from contracts with customers are Others 7,023 11,450 67,856 presented as “Trade and other receivables,” while the contract liabilities are as follows: Total ¥32,019 ¥47,606 $309,364 (Note 1) Mainly relates to gains on the sale of land. As of (Note 2) Mainly relates to gains on the sale of warehouses. As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020

Millions of yen Thousands of U.S. dollars Contract liabilities ¥39,277 ¥43,032 ¥41,548 $379,485

58 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 59 Notes to Consolidated Financial Statements

(2) Other expenses NOTE 30 OTHER COMPREHENSIVE INCOME Fiscal year ended Fiscal year ended Fiscal year ended The analysis of “Other comprehensive income” by item in terms of the amount that occurred during each fiscal year, the December 31, 2020 December 31, 2019 December 31, 2020 amount reclassified to profit or loss and the impact of tax effects are as follows: Millions of yen Thousands of U.S. dollars Fiscal year ended December 31, 2020 Impairment losses (Note 1) ¥ 89,622 ¥10,542 $ 865,910 Amount that occurred Reclassification Business and plant restructuring expenses (Note 2) 42,821 2,635 413,727 during the period adjustment Before tax effect Tax effect After tax effect

Loss on retirement of fixed assets 6,905 5,718 66,717 Millions of yen Others 9,329 5,704 90,133 Items that will not be reclassified to Total ¥148,676 ¥24,599 $1,436,487 profit or loss Net change in fair value of financial assets (Note 1) The breakdown of “Impairment losses” is presented in Note “16. Impairment of non-financial assets.” measured through other comprehensive (Note 2) The breakdown of “Business and plant restructuring expenses” is presented in Note “6. Operating Segments.” income ¥ 2,478 ¥ — ¥ 2,478 ¥ (770) ¥ 1,708 Remeasurements of defined benefit plans 9,254 — 9,254 (3,776) 5,478 Share of other comprehensive income of investments accounted for using the NOTE 29 FINANCE INCOME AND FINANCE COSTS equity method (140) — (140) — (140) The breakdown of “Finance income” and “Finance costs” are as follows: Total of items that will not be reclassi- fied to profit or loss 11,592 — 11,592 (4,546) 7,046 (1) Finance income Items that may be reclassified to profit or loss Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 Exchange differences on translation of foreign operations (94,748) — (94,748) — (94,748) Millions of yen Thousands of U.S. dollars Effective portion of change in fair value of Interest income (Note 1) ¥4,958 ¥10,269 $47,908 cash flow hedges (36) 159 124 (45) 79 Dividend income (Note 1) 2,640 6,357 25,506 Share of other comprehensive income of Others 832 1,122 8,043 investments accounted for using the equity method (1,713) (34) (1,747) — (1,747) Total ¥8,431 ¥17,748 $81,457 Total of items that may be reclassified to profit or loss (96,496) 125 (96,371) (45) (96,415) Total ¥(84,904) ¥125 ¥(84,779) ¥(4,590) ¥(89,369) (2) Finance costs

Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 Fiscal year ended December 31, 2019

Millions of yen Thousands of U.S. dollars Amount that occurred Reclassification during the period adjustment Before tax effect Tax effect After tax effect Interest expenses (Note 1) ¥13,426 ¥16,020 $ 129,721 Millions of yen Net interest of defined benefit plans (Note 2) 3,742 5,216 36,157 Items that will not be reclassified to Foreign exchange loss 3,188 3,772 30,804 profit or loss Others 3,298 3,315 31,860 Net change in fair value of financial assets Total ¥23,654 ¥28,324 $228,542 measured through other comprehensive income ¥ 8,486 ¥ — ¥ 8,486 ¥(2,365) ¥ 6,121 (Note 1) “Interest income” and “Interest expenses” arise from financial assets and financial liabilities measured at amortized cost respectively. Remeasurements of defined benefit plans 4,389 — 4,389 (1,641) 2,749 In addition, “Dividend income” arises from financial assets measured at fair value through other comprehensive income. (Note 2) The details of net interest of defined benefit plans are presented in Note “23. Employee Benefits.” Share of other comprehensive income of investments accounted for using the equity method (6) — (6) — (6) Total of items that will not be reclassi- fied to profit or loss 12,869 — 12,869 (4,005) 8,864 Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations (16,191) — (16,191) — (16,191) Effective portion of change in fair value of cash flow hedges 367 (1,627) (1,260) 396 (864) Share of other comprehensive income of investments accounted for using the equity method (1,958) (147) (2,105) — (2,105) Total of items that may be reclassified to profit or loss (17,782) (1,774) (19,555) 396 (19,159) Total ¥ (4,913) ¥(1,774) ¥ (6,686) ¥(3,609) ¥(10,295)

60 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 61 Notes to Consolidated Financial Statements

Fiscal year ended December 31, 2020 Fiscal year ended December 31, 2020 Amount that occurred Reclassification during the period adjustment Before tax effect Tax effect After tax effect Profit (loss) used for calculating basic earnings (loss) per share (Thousands of U.S. dollars) (225,134) Thousands of U.S. dollars Adjustment to profit (Thousands of U.S. dollars) — Items that will not be reclassified to Profit (loss) used to calculate diluted earnings (loss) per share (Thousands of U.S. dollars) (225,134) profit or loss Diluted earnings (loss) per share (U.S. dollars) (0.32) Net change in fair value of financial assets measured through other comprehensive (Note) In the fiscal year ended December 31, 2020, because the 1,084 thousand shares in stock options have a reverse-dilution effect, they have not been included in the income $ 23,941 $ — $ 23,941 $ (7,437) $ 16,504 calculation of diluted loss per share. Remeasurements of defined benefit plans 89,409 — 89,409 (36,482) 52,927 Share of other comprehensive income of investments accounted for using the equity method (1,349) — (1,349) — (1,349) NOTE 32 CASH FLOW INFORMATION Total of items that will not be reclassi- fied to profit or loss 112,001 — 112,001 (43,919) 68,082 Changes in liabilities arising from financing activities Items that may be reclassified to profit The changes in liabilities arising from financing activities are as follows: or loss Fiscal year ended December 31, 2020 Exchange differences on translation of foreign operations (915,436) — (915,436) — (915,436) Changes without cash flows Effective portion of change in fair value of As of Exchange differences As of January 1, Changes with cash on translation of December 31, cash flow hedges (344) 1,537 1,193 (430) 763 2020 flows Acquisition foreign operations Others 2020

Share of other comprehensive income of Millions of yen investments accounted for using the equity method (16,550) (326) (16,876) — (16,876) Long-term debt ¥ 59,850 ¥113,262 ¥ — ¥ (2,210) ¥ — ¥ 170,902 Total of items that may be reclassified Short-term debt 131,753 60,997 — (7,057) — 185,693 to profit or loss (932,329) 1,211 (931,119) (430) (931,549) Bonds 349,352 — — — 90 349,442 Total $(820,328) $1,211 $ (819,118) $(44,349) $(863,467) Lease liabilities 303,512 (57,132) 66,270 (12,498) — 300,153 Total liabilities related to financing activities ¥844,468 ¥117,127 ¥66,270 ¥(21,765) ¥ 90 ¥1,006,190

NOTE 31 EARNINGS PER SHARE (1) Basic earnings (loss) per share Fiscal year ended December 31, 2019 Basic earnings (loss) per share and its calculation basis are as follows: Changes without cash flows As of Exchange differences As of Fiscal year ended Fiscal year ended January 1, Changes with cash on translation of December 31, 2019 flows Acquisition foreign operations Others 2019 December 31, 2020 December 31, 2019 Profit (loss) attributable to owners of parent (Millions of yen) (23,301) 240,111 Millions of yen Long-term debt Profit not attributable to ordinary shareholders of parent (Millions of yen) — — ¥ 84,485 ¥(23,332) ¥ — ¥ (1,304) ¥ — ¥ 59,850 Short-term debt Profit (loss) used for calculating basic earnings (loss) per share (Millions of yen) (23,301) 240,111 97,339 35,261 — (846) — 131,753 Bonds Weighted-average number of shares of ordinary shares (Thousands of shares) 704,108 722,557 219,709 130,000 — — (357) 349,352 Lease liabilities Basic earnings (loss) per share (Yen) (33.09) 332.31 323,276 (55,002) 48,221 (13,642) 659 303,512 Total liabilities related to financing activities ¥724,809 ¥ 86,928 ¥48,221 ¥(15,791) ¥ 302 ¥844,468 Fiscal year ended December 31, 2020 Profit (loss) attributable to owners of parent (Thousands of U.S. dollars) (225,134) Fiscal year ended December 31, 2020 Profit not attributable to ordinary shareholders of parent (Thousands of U.S. dollars) — Changes without cash flows Profit (loss) used for calculating basic earnings (loss) per share (Thousands of U.S. dollars) (225,134) As of Exchange differences As of Basic earnings (loss) per share (U.S. dollars) (0.32) January 1, Changes with cash on translation of December 31, 2020 flows Acquisition foreign operations Others 2020

Thousands of U.S. dollars Long-term debt (2) Diluted earnings (loss) per share $ 578,262 $1,094,321 $ — $ (21,352) $ — $ 1,651,231 Short-term debt 1,272,980 589,338 — (68,185) — 1,794,134 Diluted earnings (loss) per share and its calculation basis are as follows: Bonds 3,375,381 — — — 872 3,376,253 Fiscal year ended Fiscal year ended Lease liabilities 2,932,486 (551,997) 640,292 (120,753) — 2,900,028 December 31, 2020 December 31, 2019 Total liabilities related to Profit (loss) used for calculating basic earnings (loss) per share (Millions of yen) (23,301) 240,111 financing activities $ 8,159,109 $1,131,662 $640,292 $(210,289) $872 $9,721,646 Adjustment to profit (Millions of yen) — — Profit (loss) used to calculate diluted earnings (loss) per share (Millions of yen) (23,301) 240,111 Weighted-average number of shares of ordinary shares (Thousands of shares) 704,108 722,557 Increase in ordinary shares Increase from stock options (Thousands of shares) — 1,194 Weighted-average number of shares of ordinary shares after dilution (Thousands of shares) 704,108 723,751 Diluted earnings (loss) per share (Yen) (33.09) 331.76

62 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 63 Notes to Consolidated Financial Statements

NOTE 33 Resolution at Board Meeting held Resolution at Board Meeting held SHARE-BASED PAYMENT on April 27, 2017 on April 27, 2017 The Company has adopted the stock option plan and the PSU. The stock option plan is an equity-settled share-based Plan A Plan B Persons granted Two directors of the One executive officer not compensation plan for directors, executive officers and corporate officers. The PSU is a performance-based stock compensa- Company excluding concurrently serving as tion plan for executive officers of the Company (“officers eligible for the grant”) under which the Company presets numerical non-executive directors, director and two corporate five executive officers not officers targets of the Company’s performance, etc. (“performance indicators”) for a certain period (“performance measuring concurrently serving as period”) and delivers the Company’s shares and cash, which are equivalent to the amount calculated by multiplying a rate directors and 45 corporate officers from 0% to 200% ,depending on a target achievement rate at the end of the performance measuring period, on the base Class and number of shares granted Ordinary shares: Ordinary shares: number of shares which are also preset by the Company. 206,500 shares 14,300 shares In addition, the performance measuring period of the PSU for the fiscal year ended December 31, 2020 is from the fiscal Date of grant May 12, 2017 July 5, 2017 year ending December 31, 2021 to the fiscal year ending December 31, 2023, and the Company’s shares and cash will be deliv- Vesting conditions No vesting condition No vesting condition ered after this performance measuring period. Target service period No specified service period No specified service period The estates delivered to the officers eligible for the grant based on the PSU consist of the Company’s shares by 50% and Exercise period From May 13, 2017 to From July 6, 2017 to May 12, 2037 July 5, 2037 cash by 50% considering individual income tax paid by the officers and other factors. Furthermore, whether the Company’s shares and cash are delivered, the officers eligible for the grant of the Company’s shares and cash, and the number of shares and the amount of cash delivered to them are not determined at the time of intro- 2) Changes in the number of stock options

duction of the PSU because, as mentioned above, the delivery of the Company’s shares and cash depends on an achievement Fiscal year ended December 31, 2020 Fiscal year ended December 31, 2019 rate of the performance indicators under this plan. Weighted-average Weighted-average Number of shares exercise price Number of shares exercise price

Shares Yen (U.S. dollars) Shares Yen (1) Stock option plan Balance at beginning of period 1,161,300 ¥1 ($0.01) 1,245,600 ¥1 The Group has not granted any new stock options since July 5, 2017. Effect of share split — — — — 1) Terms of the contracts, etc. Granted — — — —

Resolution at Annual Resolution at Annual Resolution at Annual Resolution at Annual Exercised 77,300 1 ($0.01) 84,300 1 Shareholders’ Meeting and Shareholders’ Meeting and Shareholders’ Meeting and Shareholders’ Meeting and Board Meeting held on Board Meeting held on Board Meeting held on Board Meeting held on Forfeited — — — — March 26, 2009 March 30, 2010 March 29, 2011 March 27, 2012 Balance at end of period 1,084,000 ¥1 ($0.01) 1,161,300 ¥1 Persons granted Nine directors of Eight directors of Nine directors of Nine directors of the Company and 20 the Company and 25 the Company and 36 the Company and 35 Exercisable balance as of end of period 1,084,000 ¥1 ($0.01) 1,161,300 ¥1 corporate officers not corporate officers not corporate officers not corporate officers not (Note 1) The number of stock options is presented by converting it into the number of shares. concurrently serving as concurrently serving as concurrently serving as concurrently serving as (Note 2) All the stock options have been granted at an exercise price of ¥1 ($0.01) per share. directors of the Company directors of the Company directors of the Company directors of the Company (Note 3) The weighted-average stock price of the exercised stock options at exercise during the period is ¥3,523 ($34) for the fiscal year ended December 31, 2020. As for Class and number of shares granted Ordinary shares: Ordinary shares: Ordinary shares: Ordinary shares: the fiscal year ended December 31, 2019, it was ¥4,321. 110,000 shares 118,500 shares 154,500 shares 202,000 shares (Note 4) The weighted-average remaining contractual lives of the outstanding stock options as of December 31, 2020 and 2019 were 13.4 years and 14.2 years, respectively. Date of grant May 1, 2009 May 6, 2010 May 2, 2011 May 1, 2012 Vesting conditions No vesting conditions No vesting conditions No vesting conditions No vesting conditions (2) PSU Target service period No specified service period No specified service period No specified service period No specified service period As previously mentioned, the Company has discontinued the share-based stock options plans and introduced the PSU in Exercise period From May 1, 2009 to From May 6, 2010 to From May 2, 2011 to From May 1, 2012 to April 30, 2029 April 30, 2030 April 30, 2031 April 30, 2032 March 2018.

Fiscal year ended Fiscal year ended Resolution at Annual Resolution at Annual Resolution at Annual December 31, 2020 December 31, 2019 Shareholders’ Meeting and Shareholders’ Meeting and Shareholders’ Meeting and Resolution at Board Meeting held on Board Meeting held on Board Meeting held on Board Meeting held on Number of shares granted (Shares) — — March 26, 2013 March 25, 2014 March 24, 2015 April 21, 2016 Weighted-average fair value at grant date (Yen) — — Persons granted Four directors of Four directors of Three directors of Two directors of the Company and 36 the Company and 46 the Company and 48 the Company excluding (Note) The carrying amounts of liabilities arising from share-based remuneration transactions are ¥1,013 million and ¥432 million as at December 31, 2019 and January 1, corporate officers not corporate officers not corporate officers not non-executive directors, 2019 (transition date), respectively. This is not applicable for the fiscal year ended December 31, 2020. concurrently serving as concurrently serving as concurrently serving as eight executive officers not directors of the Company directors of the Company directors of the Company concurrently serving as directors and 41 corporate (3) Share-based remuneration expenses officers Class and number of shares granted Ordinary shares: Ordinary shares: Ordinary shares: Ordinary shares: Share-based remuneration expenses included in the “Selling, general and administrative expenses” in the consolidated 196,000 shares 131,900 shares 142,500 shares 208,800 shares statement of profit or loss are ¥1,013 million ($9,783 thousand) as reversal for the fiscal year ended December 31, 2020 and Date of grant May 1, 2013 May 1, 2014 May 1, 2015 May 6, 2016 ¥581 million for the fiscal year ended December 31, 2019. Vesting conditions No vesting condition No vesting condition No vesting condition No vesting condition Target service period No specified service period No specified service period No specified service period No specified service period Exercise period From May 1, 2013 to From May 1, 2014 to From May 1, 2015 to From May 7, 2016 to April 30, 2033 April 30, 2034 April 30, 2035 May 6, 2036

64 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 65 Notes to Consolidated Financial Statements

NOTE 34 FINANCIAL INSTRUMENTS Other financial assets (1) Capital management determined to be uncollectible or extremely difficult to Allowance for doubtful accounts measured at an Financial assets for amount equal to lifetime expected credit losses The Group conducts capital management with the aim of collect. When using derivative transactions, the Group which allowance for doubtful accounts is Financial assets for increasing capital efficiency to realize maintaining a proper engages in transactions with only highly rated financial insti- measured at an amount which credit risk has equal to 12-month increased significantly Credit-impaired financial constitution and return to stockholders, while tutions to mitigate counterparty risk. expected credit losses since initial recognition financial assets Total securing the internal reserves necessary for “Restructuring The carrying amount of the financial assets after impair- Millions of yen of the earning power on our core business,” “Strategic ment presented in the consolidated statement of financial As of January 1, 2019 (Transition date) ¥70,503 ¥ 4,185 ¥ 24 ¥ 74,712 As of December 31, 2019 ¥ 79,312 ¥ 1,887 ¥ 26 ¥ 81,225 investments for growth for the expansion of our growing position is the maximum value of the exposure against the As of December 31, 2020 ¥ 58,818 ¥3,290 ¥622 ¥62,729 solution business” and “Strategic investments for growth credit risk of the Group’s financial assets. on exploring businesses.” The Group’s credit risk exposure related to notes and As management indicators, the Group utilizes ROE and accounts receivable, etc. are as follows: The Group Allowance for doubtful accounts measured at an Financial assets for amount equal to lifetime expected credit losses ROIC as items to be managed for measuring capital effi- measures the future expected credit losses to record allow- which allowance for doubtful accounts is Financial assets for ciency. The Group will also enhance to restruct and act ance for doubtful accounts on notes and accounts measured at an amount which credit risk has equal to 12-month increased significantly Credit-impaired based on a financial strategic foundation which supports receivable, etc., taking into accounts probability of recover- expected credit losses since initial recognition financial assets Total

the Mid-Term Management Plan through the realization of ability and if there has been a significant increase in credit Thousands of U.S. dollars portfolio management by “Restructuring of the earing risk, etc. Whether credit risk increases significantly or not, it As of December 31, 2020 $568,288 $31,787 $6,006 $606,081 power” using ROIC and conducting a financial assessment at is assessed based on the changes in the default risk. For this the planning and acting stage of investments without fail. purpose, the financial condition of the counterpart, past 2) Changes in allowance for doubtful accounts experience, provisions that have already been recorded and Allowance for doubtful accounts against notes and accounts receivable, etc. (2) Matters related to risk management past due information is taken into consideration. Allowance The Group is exposed to financial risk (credit risk, liquidity for doubtful accounts on trade receivables is always Financial assets for which allowance for risk, currency fluctuation risk, interest rate fluctuation risk, measured at an amount equal to lifetime expected credit doubtful accounts is always measured at an and market price fluctuation risk) in the course of performing losses, which may be measured either on an individual or amount equal to lifetime expected Credit-impaired operation activities. To avoid such financial risks, the Group collective basis, depending on the nature and size of the credit losses financial assets Total has managed these risks in accordance with certain policies. transaction. If one or several of the following events that Millions of yen can affect the estimated future cash flows of the trade Balance at January 1, 2019 ¥18,250 ¥ 14,817 ¥33,067 (3) Credit risk management receivables adversely occur, the Group assesses expected Increase during period 3,832 2,419 6,251 The Group is exposed to the credit risk—a risk of financial credit losses on an individual receivable basis as credit- Decrease during period (utilized) (1,403) (830) (2,233) Decrease during period (reversed) (1,764) (318) (2,083) loss if the counterpart to the financial assets held by the impaired trade receivables. The Group does not expose Others (120) (1) (121) Group fails to fulfill its obligations. With respect to trade itself to significant concentrations of credit risk from Balance at December 31, 2019 ¥18,795 ¥16,086 ¥34,881 receivables, the Group regularly monitors the status of its specific supplier or customer. Increase during period 5,592 6,144 11,736 major suppliers or customers, managing due dates and • significant financial difficulty of the debtor Decrease during period (utilized) (773) (2,864) (3,637) balances on an individual supplier or customer. Furthermore, • a breach of contract such as a default or past due event Decrease during period (reversed) (1,636) (1,664) (3,300) to mitigate risk, the Group promptly detects unrecoverable • the probability that the debtor will enter bankruptcy or Others (794) (997) (1,791) amount due to a deterioration of the financial position of its other financial reorganization Balance at December 31, 2020 ¥ 21,184 ¥16,705 ¥37,889 supplier or customer, or other reasons, and deems such 1) Credit risk exposure related to trade and other receiv- receivables to be in default when all or part of them are ables, etc.

Financial assets for which allowance for Notes and accounts receivable, etc. doubtful accounts is always measured at an amount equal to Financial assets for lifetime expected Credit-impaired which allowance for credit losses financial assets Total doubtful accounts is always measured at an Thousands of U.S. dollars amount equal to lifetime expected Credit-impaired Balance at December 31, 2019 $ 181,596 $155,423 $337,019 credit losses financial assets Total Increase during period 54,029 59,358 113,387 Millions of yen Decrease during period (utilized) (7,467) (27,673) (35,140) As of January 1, 2019 (Transition date) ¥766,228 ¥15,365 ¥781,593 Decrease during period (reversed) (15,811) (16,076) (31,886) As of December 31, 2019 ¥735,945 ¥ 17,175 ¥ 753,121 Others (7,673) (9,632) (17,304) As of December 31, 2020 ¥ 661,226 ¥16,969 ¥678,195 Balance at December 31, 2020 $204,676 $ 161,400 $366,075

Financial assets for which allowance for doubtful accounts is always measured at an amount equal to lifetime expected Credit-impaired credit losses financial assets Total

Thousands of U.S. dollars As of December 31, 2020 $6,388,653 $163,953 $6,552,606

66 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 67 Notes to Consolidated Financial Statements

Allowance for doubtful accounts against other financial assets Balances of financial liabilities (including derivative financial instruments) by due date as of the end of each fiscal year are as follows: Allowance for doubtful accounts measured at an Financial assets for amount equal to lifetime expected credit losses which allowance for As of December 31, 2020 doubtful accounts is Financial assets for measured at an amount which credit risk has Due after one Due after two Due after three Due after four equal to 12-month increased significantly Credit-impaired Carrying Contractual Due within year through years through years through years through Due after expected credit losses since initial recognition financial assets Total amount cash flows one year two years three years four years five years five years

Millions of yen Millions of yen Balance at January 1, 2019 ¥ 74 ¥ 382 ¥ 24 ¥ 480 Non-derivative financial liabilities Increase during period 11 199 4 214 Trade and other payables ¥ 420,140 ¥ 420,140 ¥420,140 ¥ — ¥ — ¥ — ¥ — ¥ — Decrease during period (utilized) (1) — (1) (1) Bonds and borrowings 706,037 706,595 293,978 81,618 15,425 100,380 5,063 210,131 Decrease during period (reversed) (14) (205) — (219) Lease liabilities 300,153 339,789 61,004 52,825 41,898 32,476 25,334 126,252 Others (0) — (0) (0) Subtotal 1,426,330 1,466,524 775,122 134,443 57,323 132,856 30,397 336,383 Balance at December 31, 2019 ¥ 71 ¥ 377 ¥ 26 ¥ 474 Derivative financial liabilities (Note) Increase during period 1 144 575 719 Forward exchange contracts 3,635 3,635 3,635 — — — — — Decrease during period (utilized) — — (3) (3) Currency swap contracts 4,715 4,715 1,522 (144) 442 2,895 — — Decrease during period (reversed) (5) (173) — (177) Commodity swap contracts (351) (351) (351) — — — — — Others — — 22 22 Subtotal 7,999 7,999 4,806 (144) 442 2,895 — — Balance at December 31, 2020 ¥ 67 ¥ 348 ¥620 ¥1,035 Total ¥1,434,329 ¥1,474,523 ¥779,928 ¥134,299 ¥57,765 ¥135,751 ¥30,397 ¥336,383

(Note) Receivables and payables incurred by derivative transactions are presented in net amount. Allowance for doubtful accounts measured at an Financial assets for amount equal to lifetime expected credit losses which allowance for doubtful accounts is Financial assets for measured at an amount which credit risk has As of December 31, 2019 equal to 12-month increased significantly Credit-impaired expected credit losses since initial recognition financial assets Total Due after one Due after two Due after three Due after four Thousands of U.S. dollars Carrying Contractual Due within year through years through years through years through Due after amount cash flows one year two years three years four years five years five years

Balance at December 31, 2019 $685 $ 3,641 $ 256 $ 4,581 Millions of yen Increase during period 7 1,390 5,553 6,950 Non-derivative financial liabilities Decrease during period (utilized) — — (32) (32) Trade and other payables ¥ 453,069 ¥ 453,069 ¥453,069 ¥ — ¥ — ¥ — ¥ — ¥ — Decrease during period (reversed) (44) (1,671) — (1,715) Bonds and borrowings 540,955 541,603 135,442 8,326 84,115 2,928 100,446 210,346 Others — — 217 217 Lease liabilities 303,512 344,833 59,746 51,640 43,466 34,768 26,249 128,964 Balance at December 31, 2020 $648 $ 3,360 $5,994 $10,001 Subtotal 1,297,536 1,339,505 648,257 59,966 127,581 37,696 126,695 339,310 Derivative financial liabilities (Note) Forward exchange contracts 2,972 2,972 2,972 — — — — — (4) Liquidity risk management Currency swap contracts (625) (625) (1,444) 1,510 (542) — (149) — The Group is exposed to liquidity risk which is the risk of being unable to make payments on due dates because of a deterio- Commodity swap contracts (263) (263) (263) — — — — — ration of the funding environment. Notes and accounts payable and accounts payable, which are trade payable, are largely due Subtotal 2,084 2,084 1,265 1,510 (542) — (149) — within one year. Total ¥1,299,620 ¥1,341,589 ¥649,522 ¥61,476 ¥127,039 ¥37,696 ¥126,546 ¥339,310 Based on a cash flow plan that incorporates estimated cash inflows and outflows arising from business activities, the Group mitigates liquidity risk by understanding its future cash position in advance and managing cash position efficiently while diversifying funding options, which include bank borrowings and bond issuance. To mitigate for liquidity risk, the As of January 1, 2019 (Transition date)

Group has established a required borrowing facility by entering into a commitment line agreement with several financial Due after one Due after two Due after three Due after four Carrying Contractual Due within year through years through years through years through Due after institutions. amount cash flows one year two years three years four years five years five years

Millions of yen Non-derivative financial liabilities Trade and other payables ¥ 497,173 ¥ 497,173 ¥497,173 ¥ — ¥ — ¥ — ¥ — ¥ — Bonds and borrowings 401,533 401,824 191,583 2,801 8,552 84,859 3,046 110,983 Lease liabilities 323,276 366,908 60,128 55,169 45,853 38,202 30,331 137,225 Subtotal 1,221,982 1,265,905 748,884 57,970 54,405 123,061 33,377 248,208 Derivative financial liabilities (Note) Forward exchange contracts (3,425) (3,425) (3,425) — — — — — Currency swap contracts (1,503) (1,503) 500 (2,172) 388 (220) — — Commodity swap contracts 197 197 197 — — — — — Subtotal (4,731) (4,731) (2,728) (2,172) 388 (220) — — Total ¥1,217,251 ¥1,261,174 ¥746,156 ¥55,798 ¥54,793 ¥122,841 ¥33,377 ¥248,208

68 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 69 Notes to Consolidated Financial Statements

As of December 31, 2020 (6) Interest rate risk management A part of the borrowings, etc. of the Group has a variable rate, which exposes the Group to the risk of changes in interest Due after one Due after two Due after three Due after four Carrying Contractual Due within year through years through years through years through Due after rates. The Group enters into interest rate swap contracts, if required, to hedge the risk of interest rate fluctuation risk on its amount cash flows one year two years three years four years five years five years

Thousands of U.S. dollars borrowings. Non-derivative financial liabilities Derivative transactions are limited to transactions within the scope of immediate needs in accordance with the internal Trade and other payables $ 4,059,319 $ 4,059,319 $4,059,319 $ — $ — $ — $ — $ — regulations, and the Group does not engage in speculative transactions. Bonds and borrowings 6,821,618 6,827,007 2,840,365 788,579 149,034 969,860 48,922 2,030,248 Lease liabilities 2,900,028 3,282,981 589,412 510,389 404,811 313,777 244,769 1,219,822 Interest rate sensitivity analysis Subtotal 13,780,965 14,169,307 7,489,097 1,298,967 553,845 1,283,637 293,691 3,250,070 As for the financial instruments held by the Group at each fiscal year-end, the impact of interest rate hikes by 1% on profit Derivative financial liabilities (Note) before tax is as follows: Forward exchange contracts 35,120 35,120 35,120 — — — — — This analysis is applicable to the financial instruments subject to the effects of changes in interest rates, assuming other Currency swap contracts 45,553 45,553 14,706 (1,387) 4,268 27,976 — — variable factors such as the effects of the changes in currency rates remain constant. Commodity swap contracts (3,394) (3,394) (3,394) — — — — — Fiscal year ended Fiscal year ended Fiscal year ended Subtotal 77,279 77,279 46,432 (1,387) 4,268 27,976 — — December 31, 2020 December 31, 2019 December 31, 2020 Total $13,858,244 $14,246,586 $7,535,529 $1,297,580 $558,112 $1,311,613 $293,691 $3,250,070 Millions of yen Thousands of U.S. dollars (Note) Receivables and payables incurred by derivative transactions are presented in net amount. Profit before tax ¥(93) ¥(161) $(903)

Total amount of committed line and the amount undrawn are as follows: (7) Market price fluctuation risk management As of The investment securities the Group holds are mostly stocks of its supplier or customer, which are subject to the risk of As of As of January 1, 2019 As of December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 changes in market price. Millions of yen Thousands of U.S. dollars The Group regularly monitors those fair values, the financial status of the issuers, such as supplier or customer, etc. while Total amount of committed line ¥139,512 ¥144,754 ¥165,060 $1,347,943 reviews its holdings as appropriate in light of its relationships with them. The amount drawn 1,967 2,629 3,488 19,000 The amount undrawn 137,546 142,124 161,572 1,328,943 Sensitivity of share price fluctuation risk The sensitivity analysis of the listed stocks the Group holds to share price fluctuation risk is as follows: The analysis shows the impact of drops in market prices of the listed stocks by 1% on other comprehensive income before tax effect, assuming (5) Foreign currency risk management other variables remain constant. As the Group engages in several business activities such as development, manufacture, distribution, sales and procurement globally, which entail cross-border transactions, exchange rate fluctuations affect Group’s business performance. Fiscal year ended Fiscal year ended Fiscal year ended With respect to the trade receivables and payables denominated in foreign currencies, the Company and some of its December 31, 2020 December 31, 2019 December 31, 2020 Millions of yen Thousands of U.S. dollars consolidated subsidiaries use forward exchange contracts to hedge against currency risk recognized by currency on a Other comprehensive income ¥(714) ¥(890) $(6,897) monthly basis. The Company and some of its consolidated subsidiaries may enter into forward exchange contracts and currency option contracts for foreign currency-denominated trade receivables and payables that are surely expected to be incurred from the forecast transactions related to imports and exports, depending on exchange rate conditions. The (8) Fair value measurement Company and some of its consolidated subsidiaries may also enter into currency swap contracts, if required, to hedge The fair value hierarchy of the financial instruments is categorized into the following three levels based on the inputs to the against currency risk associated with loans and borrowings denominated in foreign currencies. valuation techniques used. Derivative transactions are limited to transactions within the scope of immediate needs in accordance with the internal Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets regulations; therefore, the Group does not engage in speculative transactions. or liabilities Level 2: Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are Foreign currency sensitivity analysis observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) For the financial instruments held by the Group at each fiscal year-end, the impact of appreciation of the foreign currencies Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability against the yen by ¥1 on profit before tax is as follows: that are not based on observable market data (unobservable inputs) The figures below do not include the impact of translation of financial instruments denominated in functional currencies, assets and liabilities as well as revenues and costs of foreign operations into yen. This analysis is based on the assumption 1) Financial instruments measured at fair value that other variable factors (such as balances, interest rate, etc.) are constant. The methods for measuring of major financial instruments measured at fair value are as follows: (i) Derivative assets and derivative liabilities Fiscal year ended Fiscal year ended Fiscal year ended December 31, 2020 December 31, 2019 December 31, 2020 Derivative assets and derivative liabilities are included in other financial assets and other financial liabilities, respectively, Millions of yen Thousands of U.S. dollars and those are classified as derivative assets and derivative liabilities measured at fair value through profit or loss. These are Profit before tax ¥(65) ¥(51) $(629) forward exchange contracts, currency swap contracts and interest rate swap contracts, etc., which are measured based on the model using largely observable inputs such as foreign currency rates and interest rates.

70 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 71 Notes to Consolidated Financial Statements

(ii) Shares The changes in assets and liabilities measured at fair value by using Level 3 inputs on a recurring basis from the beginning Shares are included in other financial assets, classified into financial assets measured at fair value through other comprehen- to the end of the fiscal years ended December 31, 2020 and 2019 are as follows: sive income. The shares categorized in Level 1 are the listed stocks traded in active market, which are measured at a quoted Fiscal year ended Fiscal year ended Fiscal year ended price on the exchange. The shares categorized in Level 3 are unlisted stocks, which are primarily measured by using the net December 31, 2020 December 31, 2019 December 31, 2020 asset-based valuation model (i.e., a method of measuring enterprise value based on the net assets of the share issuing Millions of yen Thousands of U.S. dollars company, adjusted for any items that should be adjusted due to marked-to-market, if any). Balance at beginning of period ¥ 9,559 ¥8,035 $92,354 Total gains and losses The fair value hierarchy of financial instruments measured at fair value are as follows: Other comprehensive income (Note 1) 108 (260) 1,048 Purchases 529 1,804 5,108 As of December 31, 2020 Sold and collection (25) (149) (246) Transfer from Level 3 (Note 2) — (2) — Level 1 Level 2 Level 3 Total Other 720 131 6,959 Millions of yen Balance at end of period ¥10,891 ¥9,559 $105,223 Derivative assets ¥ — ¥ 2,992 ¥ — ¥ 2,992 (Note 1) Amount is included in “Net change in fair value of financial assets measured through other comprehensive income” in the consolidated statement of Shares 71,383 — 10,891 82,274 comprehensive income. Total ¥71,383 ¥ 2,992 ¥10,891 ¥85,266 (Note 2) The transfer from Level 3 recognized in the fiscal year ended December 31, 2019 was attributable to the listing of the investee on the stock exchange. Derivative liabilities — 10,991 — 10,991 Total ¥ — ¥10,991 ¥ — ¥ 10,991 The financial instruments categorized as Level 3 in the fair value hierarchy are financial assets measured at fair value through other comprehensive income for which quoted market prices are not readily available. The fair values of such financial instru- ments are calculated based on the Group’s accounting policy. When measuring the fair values, the Group determines the most As of December 31, 2019 appropriate valuation technique considering the nature of the assets, etc. with reasonably estimated input. Level 1 Level 2 Level 3 Total Millions of yen 2) Financial instruments measured at amortized cost Derivative assets ¥ — ¥4,223 ¥ — ¥ 4,223 The valuation technique for the fair value of the financial instruments measured at amortized cost is as follows: Shares 88,966 — 9,559 98,525 The table below does not include financial instruments where the carrying amounts of which reasonably approximate the Total ¥88,966 ¥4,223 ¥9,559 ¥102,748 fair values and it is not material. Derivative liabilities — 6,307 — 6,307 Bonds and borrowings Total ¥ — ¥6,307 ¥ — ¥ 6,307 The fair value of bonds are based on market prices. The fair values of the borrowings are calculated based on the present value and by discounting the total principal and interest over the remaining term at an interest rate that would be applied if As of January 1, 2019 (Transition date) similar borrowings were newly made.

Level 1 Level 2 Level 3 Total

Millions of yen As of December 31, 2020

Derivative assets ¥ — ¥ 7,471 ¥ — ¥ 7,471 Carrying amount Level 1 Level 2 Level 3 Total

Shares 167,770 — 8,035 175,805 Millions of yen Total ¥167,770 ¥ 7,471 ¥8,035 ¥183,276 Bonds and borrowings ¥412,060 ¥— ¥413,610 ¥— ¥413,610 Derivative liabilities — 2,739 — 2,739 Total ¥412,060 ¥— ¥413,610 ¥— ¥413,610 Total ¥ — ¥2,739 ¥ — ¥ 2,739

As of December 31, 2019 As of December 31, 2020 Carrying amount Level 1 Level 2 Level 3 Total

Level 1 Level 2 Level 3 Total Millions of yen Thousands of U.S. dollars Bonds and borrowings ¥405,514 ¥— ¥406,462 ¥— ¥406,462 Derivative assets $ — $ 28,903 $ — $ 28,903 Total ¥405,514 ¥— ¥406,462 ¥— ¥406,462 Shares 689,693 — 105,223 794,916 Total $689,693 $ 28,903 $105,223 $823,820 Derivative liabilities — 106,192 — 106,192 As of January 1, 2019 (Transition date)

Total $ — $106,192 $ — $ 106,192 Carrying amount Level 1 Level 2 Level 3 Total

Millions of yen Bonds and borrowings ¥209,977 ¥— ¥209,953 ¥— ¥209,953 Transfers between levels of the fair value hierarchy are recognized at the end of each fiscal year. There was no transfer Total ¥209,977 ¥— ¥209,953 ¥— ¥209,953 between Level 1 and Level 2 for the fiscal years ended December 31, 2019 and 2020.

72 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 73 Notes to Consolidated Financial Statements

As of December 31, 2020 The expected duration of cash flows from the cash flow hedges is approximately 3 months to 11 months for foreign currency contracts, which is expected to be largely the same as the expected duration of the impact on net profit or loss. Carrying amount Level 1 Level 2 Level 3 Total

Thousands of U.S. dollars For the fiscal years ended December 31, 2019 and 2020, there are no material amounts recognized in profit or loss, which Bonds and borrowings $3,981,258 $— $3,996,231 $— $3,996,231 are related to the ineffective portions of hedges and portions excluded from assessment of hedge effectiveness. Total $3,981,258 $— $3,996,231 $— $3,996,231 The changes in the cash flow hedge reserve arising from the hedging instruments designated as cash flow hedges are as follows: (9) Hedge accounting Fiscal year ended December 31, 2020 Risk management strategy The Group uses, as derivative transactions, such as forward exchange contracts and currency swap contracts to hedge against Effective portion of change in fair value of cash flow hedges Foreign currency risk Commodity-related risk Total currency risk associated with the foreign currency-denominated receivables and payables as well as foreign currency-denominated Millions of yen forecast transaction. It uses currency swap contracts, if required, to hedge against risk of changes in currency rate and interest rate Balance at January 1, 2020 associated with the foreign currency-denominated loans and borrowings. The Group also engages in interest rate swap contracts, if Other comprehensive income ¥(325) ¥— ¥(325) required, to hedge against risk of changes in interest rate of the borrowings. It uses commodity swap contracts, if required, to mitigate Amount that occurred during the period (Note 1) 198 4 202 price risk from raw materials. With respect to the execution and management of derivative transactions, the Group complies with the Amount of reclassification adjustment (Note 2) 159 — 159 internal regulations that stipulate transaction authority, and engages in the derivative transactions with only highly rated financial Tax effect (45) — (45) institutions to mitigate counterparty credit risk. Hedge ratio is appropriately determined based on the economic relationship between Balance at December 31, 2020 ¥ (13) ¥ 4 ¥ (9) the hedging instrument and hedged item as well as its risk management strategies. There is no material ineffective portion of hedge as the Group applies hedge accounting only when the critical terms of hedging instruments and hedged items match exactly. Fiscal year ended December 31, 2019

The Group uses derivatives when it is economically rational to do so, including the cases where the hedging relationship Effective portion of change in fair value of cash flow hedges does not meet the requirements to qualify for hedge accounting. Foreign currency risk Commodity-related risk Total Millions of yen The carrying amounts and changes in fair value of the hedging instruments that qualify for hedge accounting in each fiscal Balance at January 1, 2019 ¥ 1,767 ¥(25) ¥ 1,742 Other comprehensive income year are as follows: Amount that occurred during the period (Note 1) (861) 25 (836) As of December 31, 2020 Amount of reclassification adjustment (Note 2) (1,627) — (1,627) Carrying amount (Note) Tax effect 396 — 396 Hedging type Hedging instrument Contract amount Assets Liabilities Balance at December 31, 2019 ¥ (325) ¥ — ¥ (325) Millions of yen Cash flow hedges Foreign currency derivatives ¥42,229 ¥218 ¥957 Total ¥42,229 ¥218 ¥957 Fiscal year ended December 31, 2020

Effective portion of change in fair value of cash flow hedges As of December 31, 2019 Foreign currency risk Commodity-related risk Total Thousands of U.S. dollars Carrying amount (Note) Balance at January 1, 2020 Hedging type Hedging instrument Contract amount Assets Liabilities Other comprehensive income $(3,137) $— $(3,137) Millions of yen Amount that occurred during the period (Note 1) 1,903 37 1,940 Cash flow hedges Foreign currency derivatives ¥42,533 ¥— ¥759 Amount of reclassification adjustment (Note 2) 1,537 — 1,537 Total ¥42,533 ¥— ¥759 Tax effect (430) — (430) Balance at December 31, 2020 $ (126) $37 $ (90) As of January 1, 2019 (Transition date) (Note 1) The changes in fair value of the hedged items used as the basis for recognizing the ineffective portion matches the changes in fair value of the hedging instruments. Carrying amount (Note) (Note 2) The amount was reclassified as the hedged items affected net profit or loss, and it was recognized as “Other income,” “Other expenses” or “Finance income” and “Finance costs” in the consolidated statement of profit or loss. Hedging type Hedging instrument Contract amount Assets Liabilities

Millions of yen Cash flow hedges Foreign currency derivatives ¥31,547 ¥552 ¥14 (10) Transfer of financial instruments Total ¥31,547 ¥552 ¥14 The Group liquidates a part of its trade receivables. Some of these trade receivables entail a payment obligation on the Group if the debtor fails to make a payment. The Group does not derecognize those trade receivables because they do not qualify for derecognition of financial assets. As of December 31, 2020 The trade receivables transferred in such a way that did not qualify for derecognition are recorded as “Trade and other Carrying amount (Note) receivables” at the amount of ¥117,969 million ($1,139,796 thousand), ¥158,091 million and ¥167,828 million as of December 31, Hedging type Hedging instrument Contract amount Assets Liabilities 2020, December 31, 2019 and January 1, 2019 (transition date), respectively. In addition, the proceeds arising upon the Thousands of U.S. dollars transfer of the assets are recorded at the amount of ¥20,700 million ($200,000 thousand), ¥21,912 million and ¥22,200 Cash flow hedges Foreign currency derivatives $408,012 $2,101 $9,248 million, respectively, as the related liabilities in “Bonds and borrowings” as at the above dates. Total $408,012 $2,101 $9,248

(Note) The carrying amounts of these derivatives are recorded in “Other financial assets” or “Other financial liabilities” in the consolidated statement of financial position, and the amounts due for more than one year are categorized as non-current assets or non-current liabilities.

74 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 75 Notes to Consolidated Financial Statements

NOTE 35 Ownership ratio RELATED PARTY of voting rights (1) Related party transactions Name Location Description of major businesses (%) BRIDGESTONE CANADA INC. Canada Manufacturing and sales of automotive tires and automotive parts (100.0) Fiscal year ended December 31, 2020 100.0 Not applicable BRIDGESTONE DE , S.A. DE C.V. Mexico Manufacturing and sales of automotive tires (100.0) 100.0 BRIDGESTONE DO BRASIL INDUSTRIA E COMERCIO Brazil Manufacturing and sales of automotive tires (100.0) Fiscal year ended December 31, 2019 LTDA. 100.0 BRIDGESTONE ARGENTINA S.A.I.C. Argentina Manufacturing and sales of automotive tires (100.0) Not applicable 100.0 BRIDGESTONE EUROPE NV/SA Belgium Controlling businesses in Europe, Russia, Middle East, India and Africa, (100.0) As of January 1, 2019 (Transition date) and sales of automotive tires 100.0 BRIDGESTONE POZNAN SP. Z O.O. Poland Manufacturing and sales of automotive tires (100.0) Not applicable 100.0 BRIDGESTONE STARGARD SP. Z O.O. Poland Manufacturing and sales of automotive tires (100.0) 100.0 (2) Remuneration for key management personnel BRIDGESTONE TATABANYA TERMELO KFT. Hungary Manufacturing and sales of automotive tires (100.0) The remuneration for key management personnel of each fiscal year is as follows: 100.0 BRIDGESTONE HISPANIA MANUFACTURING S.L.U. Spain Manufacturing and sales of automotive tires (100.0) Fiscal year ended Fiscal year ended Fiscal year ended 100.0 December 31, 2020 December 31, 2019 December 31, 2020 BRIDGESTONE MIDDLE EAST & AFRICA FZE The United Sales of automotive tires (100.0) Arab Emirates 100.0 Millions of yen Thousands of U.S. dollars BRIDGESTONE INDIA PRIVATE LTD. India Manufacturing and sales of automotive tires (100.0) Remuneration and bonuses ¥503 ¥587 $4,857 100.0 Share-based remuneration — 195 — BRIDGESTONE (PTY) LTD. The Republic Manufacturing and sales of automotive tires (75.0) of South 75.0 Total ¥503 ¥782 $4,857 Africa BRIDGESTONE ASIA PACIFIC PTE. LTD. Singapore Controlling tire businesses in China and Asia-Pacific and sales of automotive tires 100.0 BRIDGESTONE (CHINA) INVESTMENT CO., LTD. China Controlling tire businesses in China and sales of automotive tires 100.0 BRIDGESTONE (SHENYANG) TIRE CO., LTD. China Manufacturing and sales of automotive tires (100.0) NOTE 36 SUBSIDIARIES AND ASSOCIATES, ETC. 100.0 (1) Information on significant subsidiaries BRIDGESTONE (WUXI) TIRE CO., LTD. China Manufacturing and sales of automotive tires (100.0) The significant subsidiaries and associates of the Group at December 31, 2020 are as follows: 100.0 BRIDGESTONE (HUIZHOU) TIRE CO., LTD. China Manufacturing and sales of automotive tires (10.0) Ownership ratio 100.0 of voting rights Name Location Description of major businesses (%) BRIDGESTONE TIRE MANUFACTURING VIETNAM LLC Vietnam Manufacturing and sales of automotive tires (100.0) (Consolidated subsidiaries) 100.0 BRIDGESTONE TIRE SOLUTION JAPAN CO., LTD. Chuo-ku, Controlling the sales of automotive tires for the domestic market and sales of 100.0 THAI BRIDGESTONE CO., LTD. Thailand Manufacturing and sales of automotive tires (69.2) Tokyo automotive tires 69.2 BRIDGESTONE RETAIL JAPAN CO., LTD. Chuo-ku, Sales of automotive tires and automotive products (100.0) BRIDGESTONE TIRE MANUFACTURING (THAILAND) Thailand Manufacturing and sales of automotive tires (100.0) Tokyo 100.0 CO., LTD. 100.0 BRIDGESTONE PLANT ENGINEERING CO., LTD. Hiki-gun, Manufacturing, sales, installation and maintenance of industrial machinery, etc. 100.0 P.T. BRIDGESTONE TIRE INDONESIA Indonesia Manufacturing and sales of automotive tires (54.3) BRIDGESTONE LOGISTICS CO., LTD. Chuo-ku, Shipping and warehousing 100.0 54.3 Tokyo BRIDGESTONE AUSTRALIA LTD. Australia Sales of automotive tires (100.0) BRIDGESTONE DIVERSIFIED CHEMICAL PRODUCTS Chuo-ku, Manufacturing and sales of synthetic resin products 100.0 100.0 CO., LTD. Tokyo BRIDGESTONE SPECIALTY TIRE MANUFACTURING Thailand Manufacturing and sales of tires for construction and mining vehicles and 100.0 BRIDGESTONE DIVERSIFIED PRODUCTS JAPAN Minato-ku, Sales of industrial rubber products and sales and construction of building 100.0 (THAILAND) CO., LTD. aircraft tires CO., LTD. Tokyo materials BRIDGESTONE MINING SOLUTIONS AUSTRALIA PTY. Australia Sales and supplying related services of tires for construction and mining vehicles 100.0 BRIDGESTONE ELASTECH Kakegawa, Manufacturing of antivibration products and metal fittings for automotive and 100.0 LTD. and conveyor belts, etc. Shizuoka general industries BRIDGESTONE (HUIZHOU) SYNTHETIC RUBBER China Manufacturing and sales of synthetic rubber 100.0 CO., LTD. BRIDGESTONE CHEMITECH CO., LTD. Nabari, Mie Manufacturing and sales of synthetic resin products 100.0 BRIDGESTONE SINGAPORE PTE LTD. Singapore Sales and purchase of natural rubber 100.0 BRIDGESTONE SPORTS CO., LTD. Minato-ku, Manufacturing and sales of sporting goods 100.0 Tokyo BRIDGESTONE TREASURY SINGAPORE PTE.LTD. Singapore Loaning of cash and factoring 100.0 BRIDGESTONE CYCLE CORPORATION Ageo, Manufacturing and sales of bicycles 100.0 Other: 236 companies Saitama (Associates accounted for using the equity method, U.S.A. Sales of automotive tires BRIDGESTONE FINANCE CO., LTD. Kodaira, Loaning of cash, factoring and entrusted service for accounting and payroll 100.0 etc.) (50.0) Tokyo TIREHUB, LLC 50.0 BRIDGESTONE AMERICAS, INC. U.S.A. Controlling businesses in Americas 100.0 BRISA BRIDGESTONE Turkey Manufacturing and sales of automotive tires 43.6 SABANCI LASTIK SANAYI BRIDGESTONE AMERICAS TIRE OPERATIONS, LLC U.S.A. Manufacturing and sales of automotive tires (100.0) VE TICARET A.S. 100.0 Other: 135 companies BRIDGESTONE RETAIL OPERATIONS, LLC U.S.A. Sales of automotive tires and products and, maintenance and repairing of (100.0) 100.0 vehicles (Note) Figures in parenthesis in the ownership ratio of voting rights column indicates indirect ownership ratio. BRIDGESTONE BANDAG, LLC U.S.A. Manufacturing and sales of retread material and supply of related techniques (100.0) 100.0 FIRESTONE POLYMERS, LLC U.S.A. Manufacturing and sales of synthetic rubber (100.0) (2) Significant associates and jointly controlled entities 100.0 There are no significant associates and jointly controlled entities of the Group. FIRESTONE BUILDING PRODUCTS COMPANY, LLC U.S.A. Manufacturing and sales of roofing materials, etc. (100.0) 100.0 (3) Impairment of investments in a jointly controlled entity The details are presented in Note “16. Impairment of non-financial assets.”

76 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 77 Notes to Consolidated Financial Statements

NOTE 37 COMMITMENTS NOTE 39 FIRST-TIME ADOPTION OF IFRS Commitments for the acquisition of assets after the closing date of each fiscal year are as follows: The Group prepared its consolidated financial statements in 4) Leases accordance with IFRS from the fiscal year ended December The Group assessed whether a contract existing at the As of As of As of January 1, 2019 As of 31, 2020. The most recent consolidated financial statements transition date contains a lease on the basis of facts and December 31, 2020 December 31, 2019 (Transition date) December 31, 2020 prepared in accordance with Japanese GAAP are those for circumstances existing at the transition date. The Group Millions of yen Thousands of U.S. dollars the fiscal year ended December 31, 2019, and the date of measured a lease liability at the present value of the Acquisition of property, plant and equipment ¥49,066 ¥77,260 ¥36,590 $474,063 transition to IFRS is January 1, 2019. remaining lease payments, discounted using the lessee’s Acquisition of intangible assets 2,235 1,200 155 21,591 incremental borrowing rate at the transition date. In addi- Total ¥51,300 ¥78,460 ¥36,745 $495,655 (1) Exemption in IFRS 1 tion, the Group measures, on a lease-by-lease basis, a IFRS requires, as a general rule, a company adopting IFRS right-of-use asset at either: (i) its carrying amount as if IFRS for the first time to apply the provisions required under IFRS 16 had been applied since the commencement date of NOTE 38 SIGNIFICANT SUBSEQUENT EVENTS retrospectively. However, IFRS 1 allows exemptions for lease, but discounted using the lessee’s incremental (Sale of subsidiary) As a result of a detailed consideration of FSBP’s future retrospective application of some IFRS requirements on borrowing rate at the transition date; or (ii) an amount BRIDGESTONE AMERICAS, INC., a U.S. subsidiary of the positioning from the standpoint of the Company’s mid-long first-time adoption of IFRS. The Group elected to apply the equal to the lease liability. Further, the Group expensed the Company, has concluded an agreement with LafargeHolcim term business strategy, the Company deemed that the best following exemptions for the transition from Japanese lease payments associated with leases for which the lease Ltd., a Swiss building materials manufacturer, regarding the course of action was to sell FSBP to Holcim Participations GAAP to IFRS: term ends within 12 months of the transition date and sale of FIRESTONE BUILDING PRODUCTS COMPANY, LLC (US) Inc., the U.S. subsidiary of LafargeHolcim Ltd., a global 1) Business combinations leases for which the underlying asset is of low value. (hereinafter “FSBP”), a subsidiary of BRIDGESTONE AMER- leader in building solutions. The Group elected not to apply IFRS 3 “Business Combina- ICAS, INC. in the Americas segment, to Holcim Participations As a result of the sale, more growth opportunities will be tions” retrospectively to business combinations that (2) Mandatory exception under IFRS 1 (US) Inc., a U.S. subsidiary of LafargeHolcim Ltd., on January created for FSBP under LafargeHolcim Ltd, and the occurred before the transition date. Consequently, the IFRS 1 prohibits retrospective application of IFRS with 6, 2021 (local time). And the transaction has been Company will be able to rebuild the earning power of its tire amount of goodwill arising from business combinations respect to “estimates,” “derecognition of financial assets completed on March 31, 2021. and rubber businesses and to make strategic investments in before the transition date is based on the carrying amount and financial liabilities,” “hedge accounting,” “non-control- In accordance with the Company’s decision for the sale, its solutions business. at the transition date under Japanese GAAP. ling interests,” “classification and measurement of financial the Company has categorized FSBP and its subsidiaries as Furthermore, following this sale, the Company has removed  Further, the Group performed an impairment test on instruments,” etc. Thus, the Group applied IFRS to these discontinued operations for the 2021 fiscal year(January 1, FSBP and its subsidiaries from the Company’s consolidated goodwill at the transition date regardless of whether there items from the transition date and onwards. 2021 to December 31, 2021). subsidiaries. was any indication that the goodwill may be impaired. Accordingly, profit from discontinued operations on the 2) Exchange differences on translation of foreign operations (3) Reconciliations consolidated statement of profit or loss has been presented 2. Period for the sale of the subsidiary The Group elected to deem all cumulative exchange differ- The reconciliations required to be disclosed on the first- separately from the continuing operations. Resolution date at the Company’s Board of Directors ences on translation of foreign operations as zero at the time adoption of IFRS are as follows. January 6, 2021 transition date. In the reconciliations below, “Reclassification” includes 1. Reasons for the sale of the subsidiary Contract conclusion date for the sale of the subsidiary 3) Designation of financial assets recognized prior to the items that do not affect retained earnings and comprehen- Founded in 1980, FSBP is a leading company in building January 6, 2021 (local time) transition date sive income, while “Differences in recognition and materials including roofing materials. Execution date for the sale of the subsidiary The Group assessed the classification of financial assets measurement” include items that affect retained earnings March 31, 2021 under IFRS 9 “Financial Instruments” on the basis of facts and comprehensive income. and circumstances existing at the transition date and desig- nated some equity financial assets as financial assets 3. Name and contents of business of the subsidiary being sold measured through other comprehensive income. Name FIRESTONE BUILDING PRODUCTS COMPANY, LLC Contents of business Manufacturing and sales of roofing materials for building and related products Contents of transactions with the company The Company has no transactions with the relevant subsidiary

4. Sales value, gain (loss) on sales, and equity ratio before and after sale

Sales value The Company will determine the sales value after adjusting FSBP’s operating capital and other factors to a company value of 3.4 billion U.S. dollars. Gain (loss) on sales The Company records net profit from discontinued operations of 225.3 billion yen as a gain on sales (after tax) in our first quarter of fiscal 2021 consolidated statements of profit or loss. Pre-sale equity ratio 100% Sale equity ratio 100% Post-sale equity ratio 0%

78 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 79 Notes to Consolidated Financial Statements

Reconciliations of equity as of January 1, 2019 (transition date) Differences in recognition and Line items under Japanese GAAP Japanese GAAP Reclassification measurement IFRS Notes Line items under IFRS Differences in recognition and Millions of yen Line items under Japanese GAAP Japanese GAAP Reclassification measurement IFRS Notes Line items under IFRS Liabilities Liabilities Millions of yen Current liabilities Current liabilities Assets Assets Notes and accounts payable ¥ 233,970 ¥ 264,236 ¥ (1,033) ¥ 497,173 (1) Trade and other payables Current assets Current assets Short-term debt 100,627 90,955 (27) 191,556 (1) Bonds and borrowings Cash and deposits ¥ 440,378 ¥ (6,462) ¥ — ¥ 433,916 Cash and cash equivalents Commercial paper 20,955 (20,955) — — (1) Notes and accounts receivable 603,119 19,091 159,705 781,916 (1) (2) Trade and other receivables Current portion of bonds 70,000 (70,000) — — (1) Finished products 406,964 204,240 34,720 645,924 (1) (3) Inventories Lease obligations 11,495 — 40,601 52,097 (5) Lease liabilities Work in process 37,904 (37,904) — — (1) Income taxes payable 15,073 11,314 9,016 35,404 Income taxes payable Raw materials and supplies 171,720 (171,720) — — (1) — 24,996 — 24,996 Other financial liabilities Marketable securities 153,853 15,528 (143,514) 25,867 (2) Other financial assets Provision for sales returns 3,531 32,910 (3,362) 33,080 Provisions Other current assets 123,188 (41,916) (2,838) 78,435 (1) Other current assets Provision for reorganization of Allowance for doubtful 4,333 (4,333) — — (21,729) 21,729 — — R&D and manufacturing base accounts Accounts payable 186,677 (186,677) — — (1) Total current assets 1,915,400 2,586 48,073 1,966,059 Subtotal Accrued expenses 190,754 (190,754) — — (1) — 1,788 — 1,788 Non-current assets held for sale Other current liabilities 61,215 54,455 7,519 123,190 (1) Other current liabilities Total current assets 1,915,400 4,374 48,073 1,967,847 Total current assets Total current liabilities 898,633 6,147 52,715 957,495 Subtotal Fixed assets Non-current assets Liabilities directly associated with non-current — — — — Property, plant and equipment 1,524,681 (86,526) 76,886 1,515,042 (1) (4) Property, plant and equipment assets held for sale — 80,087 242,583 322,670 (1) (5) Right-of-use assets Total current liabilities 898,633 6,147 52,715 957,495 Total current liabilities Intangible assets Long-term liabilities Non-current liabilities Goodwill 41,381 — — 41,382 Goodwill Bonds 150,000 (150,000) — — (1) Other intangible fixed assets 48,987 4,137 (3,414) 49,710 Intangible assets Long-term debt 38,041 150,000 21,936 209,977 (1) (2) Bonds and borrowings Investments accounted for using equity — 47,839 175 48,014 (1) Lease obligations 68,975 — 202,203 271,179 (5) Lease liabilities method — 11,824 — 11,824 Other financial liabilities Investments and other assets Net defined benefit liability 196,005 7,862 4,061 207,928 Retirement benefit liabilities Investments in securities 219,970 (7,668) 5,004 217,306 (1) Other financial assets Provision for product 2,999 (2,999) — — Long-term loans receivable 11,465 (11,465) — — warranties Deferred tax assets 65,698 — (8,319) 57,379 (6) Deferred tax assets Provision for environmental 1,511 (1,511) — — remediation Net defined benefit asset 371 (371) — — Provision for reorganization of — 23,072 1,141 24,212 Provisions Other assets 65,376 (28,859) (3,190) 33,327 Other non-current assets R&D and manufacturing base Allowance for doubtful (1,524) 1,524 — — Deferred tax liabilities 27,723 — 18,890 46,613 (6) Deferred tax liabilities accounts Other long-term liabilities 73,524 (41,321) (3,126) 29,077 Other non-current liabilities Total fixed assets 1,976,407 (1,302) 309,724 2,284,830 Total non-current assets Total long-term liabilities 558,781 (3,075) 245,104 800,810 Total non-current liabilities Total assets ¥3,891,808 ¥ 3,072 ¥357,797 ¥4,252,677 Total assets Total liabilities 1,457,414 3,072 297,819 1,758,306 Total liabilities Equity Equity Common stock 126,354 — — 126,354 Common stock Capital surplus 121,997 — — 121,998 Capital surplus Treasury stock (32,648) — — (32,648) Treasury stock Net unrealized gain (loss) on 108,888 (305,364) 315,291 118,815 (7) Other components of equity available-for-sale securities Deferred gain (loss) on 1,730 (1,730) — — derivative instruments Foreign currency translation (174,850) 174,850 — — adjustments Remeasurements of defined (135,696) 135,696 — — benefit plans Stock acquisition rights 3,452 (3,452) — — Retained earnings 2,360,967 — (255,687) 2,105,280 (7) (8) Retained earnings 2,439,799 Total equity attributable to owners of parent Non-controlling interests 54,198 — 374 54,572 Non-controlling interests Total equity 2,434,393 — 59,978 2,494,371 Total equity Total liabilities and equity ¥3,891,808 ¥ 3,072 ¥ 357,797 ¥4,252,677 Total liabilities and equity

80 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 81 Notes to Consolidated Financial Statements

Reconciliations of equity as of the end of the previous fiscal year (December 31, 2019) Differences in recognition and Line items under Japanese GAAP Japanese GAAP Reclassification measurement IFRS Notes Line items under IFRS Differences in recognition and Millions of yen Line items under Japanese GAAP Japanese GAAP Reclassification measurement IFRS Notes Line items under IFRS Liabilities Liabilities Millions of yen Current liabilities Current liabilities Assets Assets Notes and accounts payable ¥ 202,048 ¥ 250,207 ¥ 814 ¥ 453,069 (1) Trade and other payables Current assets Current assets Short-term debt 76,745 58,696 — 135,442 (1) Bonds and borrowings Cash and deposits ¥ 441,255 ¥ (8,331) ¥ — ¥ 432,924 Cash and cash equivalents Commercial paper 58,696 (58,696) — — (1) Notes and accounts receivable 583,223 22,608 149,513 755,344 (1) (2) Trade and other receivables Lease obligations 12,094 — 40,733 52,827 (5) Lease liabilities Finished products 406,119 190,999 33,044 630,162 (1) (3) Inventories Income taxes payable 40,497 4,209 6,800 51,506 Income taxes payable Work in process 39,360 (39,360) — — (1) — 27,628 — 27,628 Other financial liabilities Raw materials and supplies 150,943 (150,943) — — (1) Provision for sales returns 3,337 33,789 (2,194) 34,931 Provisions Marketable securities 136,044 14,107 (135,841) 14,311 (2) Other financial assets Provision for recall 4,534 (4,534) — — Other current assets 135,496 (51,685) (3,168) 80,643 (1) Other current assets Accounts payable 175,562 (175,562) — — (1) Allowance for doubtful (21,377) 21,377 — — accounts Accrued expenses 193,756 (193,756) — — (1) Total current assets 1,871,066 (1,228) 43,547 1,913,385 Subtotal Other current liabilities 71,039 60,655 7,286 138,980 (1) Other current liabilities — 5,023 — 5,023 Non-current assets held for sale Total current liabilities 838,312 2,634 53,438 894,383 Subtotal Total current assets 1,871,066 3,795 43,547 1,918,408 Total current assets Liabilities directly associated with non-current — 953 — 953 assets held for sale Fixed assets Non-current assets Total current liabilities 838,312 3,586 53,438 895,336 Total current liabilities Property, plant and equipment 1,562,160 (79,452) 72,461 1,555,170 (1) (4) Property, plant and equipment Long-term liabilities Non-current liabilities — 74,035 224,535 298,569 (1) (5) Right-of-use assets Bonds 350,000 (350,000) — — (1) Intangible assets Long-term debt 34,249 350,000 21,264 405,514 (1) (2) Bonds and borrowings Goodwill 91,410 — 6,935 98,346 Goodwill Lease obligations 65,673 — 185,011 250,685 (5) Lease liabilities Other intangible fixed assets 113,639 3,219 (3,195) 113,664 Intangible assets — 12,937 — 12,937 Other financial liabilities Investments accounted for using equity — 46,873 198 47,071 (1) method Net defined benefit liability 201,412 7,001 3,206 211,619 Retirement benefit liabilities Investments and other assets Provision for product warranties 2,687 (2,687) — — Investments in securities 141,820 (6,065) 4,706 140,462 (1) Other financial assets Provision for environmental 874 (874) — — remediation Long-term loans receivable 7,980 (7,980) — — — 22,510 838 23,348 Provisions Deferred tax assets 77,081 — (16,371) 60,711 (6) Deferred tax assets Deferred tax liabilities 34,977 — 9,266 44,243 (6) Deferred tax liabilities Net defined benefit asset 7,797 (7,797) — — Other long-term liabilities 74,026 (40,686) (2,485) 30,856 Other non-current liabilities Other assets 74,686 (25,980) (4,090) 44,616 Other non-current assets Total long-term liabilities 763,902 (1,800) 217,100 979,203 Total non-current liabilities Allowance for doubtful (1,138) 1,138 — — accounts Total liabilities 1,602,215 1,785 270,538 1,874,539 Total liabilities Total fixed assets 2,075,438 (2,010) 285,180 2,358,608 Total non-current assets Equity Equity Total assets ¥3,946,505 ¥ 1,785 ¥328,727 ¥4,277,016 Total assets Common stock 126,354 — — 126,354 Common stock Capital surplus 121,997 — — 121,998 Capital surplus Treasury stock (232,330) — — (232,330) Treasury stock Net unrealized gain (loss) on 55,363 (315,393) 302,691 42,661 (7) Other components of equity available-for-sale securities Deferred gain (loss) on (342) 342 — — derivative instruments Foreign currency translation (189,271) 189,271 — — adjustments Remeasurements of defined (129,054) 129,054 — — benefit plans Stock acquisition rights 3,275 (3,275) — — Retained earnings 2,535,720 — (245,025) 2,290,696 (7) (8) Retained earnings 2,349,378 Total equity attributable to owners of parent Non-controlling interests 52,576 — 523 53,099 Non-controlling interests Total equity 2,344,290 — 58,188 2,402,477 Total equity Total liabilities and equity ¥3,946,505 ¥ 1,785 ¥328,727 ¥4,277,016 Total liabilities and equity

Notes on reconciliations of equity under Japanese GAAP, are reclassified and presented as (1) Reclassifications “Trade and other receivables” under IFRS. The Group reclassified the following items between Japa- 2) “Finished products,” “Work in process,” and “Raw mate- nese GAAP and IFRS to comply with the provisions of IFRS. rials and supplies,” which were separately presented The major reclassifications are as follows: under Japanese GAAP, are presented in aggregate as 1) Accounts receivable - other, which was included in and “Inventories” under IFRS. presented as “Other current assets” in current assets

82 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 83 Notes to Consolidated Financial Statements

3) Right-of-use assets, which were included in and (4) Property, plant and equipment Reconciliations of profit or loss and comprehensive income for the fiscal year ended December 31, 2019 (January 1, 2019 - presented as “Property, plant and equipment” under Under Japanese GAAP, depreciation of “Property, plant and December 31, 2019) Japanese GAAP, are separately presented as “Right-of- equipment” of the Company and its domestic subsidiaries Differences in use assets” under IFRS. was computed by the declining-balance method, while the recognition and Line items under Japanese GAAP Japanese GAAP Reclassification measurement IFRS Notes Line items under IFRS

4) Equity method investments, which were included in and straight-line method was applied to property, plant and Millions of yen presented as “Investments in securities” in Fixed assets equipment of the Company’s overseas subsidiaries. Net sales ¥3,525,600 ¥ (18,061) ¥ (296) ¥3,507,243 Revenue under Japanese GAAP, are separately presented as However, under IFRS, the straight-line method is consis- Cost of sales 2,201,684 (18,722) (408) 2,182,554 (2) (3) Cost of sales “Investments accounted for using the equity method” tently applied to property, plant and equipment of the Gross profit 1,323,916 660 112 1,324,689 Gross profit under IFRS. entire Group. Selling, general and administrative 997,817 13,169 (12,626) 998,360 (1) (3) (4) Selling, general and administrative expenses expenses 5) “Notes and accounts payable,” “Accounts payable,” and — 47,615 (9) 47,606 (1) Other income “Accrued expenses,” which were separately presented (5) Right-of-use assets and lease liabilities — 23,547 1,052 24,599 (1) Other expenses under Japanese GAAP, are presented as “Trade and other The Group newly recognized “Right-of-use assets” and Operating income 326,098 11,560 11,678 349,336 Operating profit payables” and “Other current liabilities” under IFRS. “Lease liabilities” principally for buildings and land as a Non-operating income 28,018 (28,018) — — (1) 6) “Short-term debt,” “Commercial paper,” and “Current lessee of such leases principally in Japan and the Americas Non-operating expenses 37,293 (37,293) — — (1) portion of bonds,” which were separately presented in accordance with provisions of IFRS 16. Ordinary income 316,823 (316,823) — — under Japanese GAAP, are presented in aggregate as Extraordinary income 116,134 (116,134) — — (1) “Bonds and borrowings” in current liabilities under IFRS. (6) Deferred tax assets and deferred tax liabilities Extraordinary loss 25,706 (25,706) — — (1) 7) “Bonds” and “Long-term debt,” which were separately The Group reconciled the amounts of “Deferred tax assets” — 94,366 (76,617) 17,748 (1) (5) Finance income presented under Japanese GAAP, are presented in aggre- and “Deferred tax liabilities” principally for the temporary — 21,582 6,741 28,324 (1) (6) Finance costs gate as “Bonds and borrowings” in non-current liabilities differences resulting from the reconciliations from Japa- — (3,190) (61) (3,251) (1) Share of profit (loss) of investments accounted for using equity method under IFRS. nese GAAP to IFRS. Income before income taxes and 407,251 — (71,742) 335,510 Profit before tax non-controlling interests Income taxes 108,303 — (19,085) 89,219 (7) Income tax expense (2) Trade and other receivables (7) Other components of equity Income before non-controlling ¥ 298,947 ¥ — ¥(52,657) ¥ 246,291 Profit For liquidated receivables that were derecognized and The Group applied the exemption set forth under IFRS 1 and interests included in and presented as “Marketable securities” in transferred all “Foreign currency translation adjustments” Profit attributable to current assets under Japanese GAAP, those that do not under Japanese GAAP to “Retained earnings” on the transi- Profit attributable to owners of 292,598 — (52,487) 240,111 Owners of parent parent satisfy the derecognition criteria under IFRS are included in tion date. Profit attributable to non-control- 6,349 — (170) 6,179 Non-controlling interests and presented as “Trade and other receivables” in accor- Under Japanese GAAP, the Group prorated the amount of ling interests Income before non-controlling 298,947 — (52,657) 246,291 Profit dance with provisions of IFRS 9. In addition, liabilities remeasurements of net defined benefit liability (assets) on interests associated with the proceeds from the transfer of such a straight-line method over a certain number of years Other comprehensive income Other comprehensive income assets are included in and presented as “Bonds and borrow- within the average remaining service period of employees Items that will not be reclassified to profit or loss ings” in non-current liabilities. when it was incurred, and expensed the prorated amount Net unrealized gain (loss) on (53,518) — 59,639 6,121 (7) Net change in fair value of financial assets available-for-sale securities measured through other comprehensive income from the fiscal year following the year in which it was Remeasurements of defined 6,926 — (4,177) 2,749 (7) Remeasurements of defined benefit plans (3) Inventories incurred. However, under IFRS, the Group recognized such benefit plans — (6) (6) Share of other comprehensive income of The Group changed the valuation method of “Inventories” amount in other comprehensive income when it was incurred, investments accounted for using equity method from the last-in, first-out method to the moving-average and immediately transferred it to “Retained earnings.” 8,864 Total of items that will not be reclassified to profit method for the Americas operations in accordance with or loss provisions of IAS 2 “Inventories” (hereinafter “IAS 2”). Items that may be reclassified to profit or loss Foreign currency translation (11,647) — (4,544) (16,191) Exchange differences on translation of foreign adjustments operations (8) Retained earnings Deferred gain (loss) on derivative (864) — — (864) Effective portion of change in fair value of cash The effect of the reconciliations upon adoption of IFRS on retained earnings is as follows: instruments flow hedges Share of other comprehensive (2,213) — 108 (2,105) Share of other comprehensive income of As of January 1, 2019 As of December income in affiliates investments accounted for using equity method (Transition date) 31, 2019 (19,159) Total of items that may be reclassified to profit Millions of yen or loss (2) Reconciliation of trade and other receivables ¥ (5,745) ¥ (7,592) Total other comprehensive income ¥ (61,317) ¥ — ¥ 51,022 ¥ (10,295) Other comprehensive income, net of tax (3) Reconciliation of inventories 34,720 33,044 Comprehensive income 237,629 — (1,634) 235,995 Comprehensive income (4) Reconciliation of property, plant and equipment 76,886 72,461 Comprehensive income attribute to 229,223 — (1,706) 227,517 Comprehensive income attributable to owners of parent Owners of parent (5) Reconciliation of right-of-use assets and lease liabilities (221) (1,209) Comprehensive income attribute to 8,406 — 72 8,478 Non-controlling interests (7) Reconciliation of exchange differences on translation of foreign operations (174,850) (174,850) non-controlling interests (7) Reconciliation of remeasurements of defined benefit plans (135,696) (129,054) Other (23,198) (11,665) Subtotal (228,104) (218,865) (6) Reconciliation of tax effects (27,209) (25,637) Reconciliation of non-controlling interests (374) (523) Total ¥(255,687) ¥(245,025)

84 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 85 Notes to Consolidated Financial Statements

Notes on reconciliations of profit or loss and comprehensive (6) Finance costs income Under Japanese GAAP, the Group calculated the interest (1) Reclassifications cost by multiplying the defined benefit obligations by the Items presented in “Non-operating income,” “Non-oper- discount rate and the expected return on plan assets by ating expenses,” “Extraordinary income,” and multiplying the plan assets by the expected rate of return “Extraordinary losses” under Japanese GAAP are reclassi- on plan assets to recognize them as retirement benefit fied as follows under IFRS: Items of financial profit or loss expenses. However, under IFRS, the Group reconciled are presented as “Finance income” or “Finance costs,” “Finance costs” as it recognized net interest by multiplying respectively, and the other items are presented as “Selling, the defined benefit obligation net of plan assets by the general and administrative expenses,” “Other income,” discount rate. “Other expenses,” or “Share of profit (loss) of investments accounted for using equity method.” (7) Income tax expense and other comprehensive income For gain or loss on sales of equity instruments recognized in (2) Cost of sales profit or loss and income taxes on such gain under Japanese The Group reconciled “Cost of sales” since it has changed GAAP, the Group reconciled “Income tax expense” and “Net the valuation method of “Inventories” from the last-in, change in fair value of financial assets measured through first-out method to the moving-average method for the other comprehensive income” since it did not recognize Americas operations in accordance with the provisions gain or loss on sales of certain equity instruments designated of IAS 2. as financial assets measured at fair value through other comprehensive income in profit or loss under IFRS. (3) Cost of sales and selling, general and administrative In addition, under Japanese GAAP, the Group prorated expenses the amount of remeasurements of net defined benefit Under Japanese GAAP, depreciation of property, plant and liability (assets ) on a straight-line method over a certain equipment of the Company and its domestic subsidiaries number of years within the average remaining service was computed by the declining-balance method, while the period of employees when it was incurred, and recognized straight-line method was applied to property, plant and the prorated amount in profit or loss from the fiscal year equipment of the Company’s overseas subsidiaries. following the year in which it was incurred. However, under However, under IFRS, the straight-line method is consis- IFRS, the Group recognized such amount in other compre- tently applied to property, plant and equipment of the hensive income when it was incurred, and reconciled Group. Due to this change, the Group reconciled “Cost of “Remeasurements of defined benefit plans” in order to sales” and “Selling, general and administrative expenses” transfer such amount to “Retained earnings” immediately. that include depreciation. Reconciliations of cash flows for the fiscal year ended (4) Selling, general and administrative expenses December 31, 2019 (from January 1, 2019 to December Under Japanese GAAP, goodwill was amortized on a 31, 2019) straight-line method over the period for which goodwill is The major difference between the consolidated state- expected to have an effect. However, under IFRS, the Group ment of cash flows disclosed in accordance with the discontinued the amortization of goodwill on and after the Japanese GAAP and the consolidated statement of cash transition date. flows disclosed under IFRS is that “Lease payments associ- ated with operating leases” previously included in “Cash (5) Finance income flows from operating activities” are now included in “Cash Under Japanese GAAP, the Group recognized gain or loss on flows from financing activities” as “Repayments of lease sales of equity instruments in profit or loss. However, under liabilities” due to the application of IFRS 16. As a result, net IFRS, the Group recognized any change in fair value as other cash provided by operating activities increased by ¥41,914 comprehensive income for equity instruments designated million, and net cash used in financing activities increased as those measured at fair value through other comprehen- by ¥41,914 million. sive income, and reconciled “Finance income” in order to transfer the change to retained earnings immediately when the equity instruments are sold.

86 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 87 88 Bridgestone Corporation ANNUAL REPORT 2020 Financial Review 89 Bridgestone Corporation 1-1, Kyobashi 3-chome, Chuo-ku, Tokyo 104-8340, Japan https://www.bridgestone.com

June 2021